Business Model Introduction
As defined by James A. O’brien and George M. Marakas (2011) in Management Information Systems, “A business model is a conceptual framework that expresses the underlying economic logic and system that prove how a business can deliver value to customers at an appropriate cost and make money.” Groupon, in terms of business model, is a typical example of the aforementioned emerging trend. In this section, significant components such as customer relationships, market segments, revenue generation, and value chain structure that underlie the business model will be examined in depth. Several problems in Groupon's model will also be discussed which are contended to undermine its sustainability.
Value Chain Structure
The Groupon’s position and activities in the value chain is an extensive process to create value that exceeds the cost.
Groupon is not a manufacturer, which means is not a traditional definition supplier, it is more likely a platform to connect consumers with suppliers. Inbound logistics and operations for the firm are quite simplistic as suppliers undertake most of these parts.
The sales and customer service are much baser for Groupon. Once the everyday-deal is posted, emails will be sent to the customers immediately. What’s more, all deals get great cheaper than retail prices, which give a cost advantage to Groupon attracting customers. There is a chat room on Groupon’s official website for customers writing questions and reviews, and Groupon passes these comments to the venders directly. Responding in time create a great relation between both consumers and venders, which add value for consumers. Also, if the actual demand exceeds the quantities suppliers provided, Groupon will refund consumers to gain the satisfaction.
The rapid development of Groupon depends to a great extent on its targeting strategies. Specifically, there are three main types of segmentation Groupon uses for its targeted email messaging system.
The first one is geographic segmentation which is using customer addresses to send them different local ‘deals of the day’. The second segmentation is based on product types. For example, the Groupon Getaways email program is focuses on travel, and the GrouponLive program is about live events. The third segmentation is personal data which is used to predict the needs of different customers and send customised deals to them. These three segmentations can not only save the customer time from searching the right products for themselves, but also help the company to build its own customer database and use it to earn more profits.
All the companies depend on customers for survival, so customer relationships have become a business’s most valued asset
Known how to acquire, enhance and retain customer relationship is essential for a business to capture value in their strategic business model.
Groupon are implementing the CRM business initiatives as its key strategy and making efforts to maintain a huge email list. The platform of Groupon will only provide information once you put in your e-mail, then the subscribers will receive the daily e-mail provided them the hot offers in the region. In this way, it can acquire new customers quickly and cheaply. Besides, Groupon knows the power of going social. Consumers can increase one’s chances of getting a great offer by sharing the brand with one’s online contacts through various social avenues. Owing to this, the word Groupon is now a familiar name associated to “cuts” or “good deals” which also acquires more customers. Although, Groupon has a larger subscriber data base than other competitors, this database has poor quality. According to the report, only about 20% subscribers have ever purchased a groupon and half of these purchasers never bought again. That is, Groupon has a low brand loyalty and it should focus on how to retain the large number of existing