One of the simplest ways to present the Groupon´s business model is to view its proposition as a global retailer of the products produced, manufactured and sold by other companies. The Groupon supply chain and end-to-end business model are based on two pillars: relations with businesses and final consumers. This complicates the way in which the company operates, as B2B business model is totally different from B2C relationships. To answer the question about the complexity of the work with Groupon, it is important to understand that Groupon is a profit organization. The breakeven point for the company also depends on the ability and potential of their partner. As such, the choice that the company makes in regards to their advertisement preferences determines the limit and level of their profit. In this sense, it is difficult to be a partner of Groupon. Businesses willing to become part of Groupon program should be able to offer a differentiated product and big profit sacrifice to become interesting for Groupon (Smith, 2011). Actual business model is, however, very simple. Groupon offers a contract for its B2B customers that stipulate minimum discount and conditions of the sales. Potential business partner should analyze and, consequently, comply with the terms. Financial benefit for Groupon in this case is a % of each sale, which in general is very high, reaching 60% of the revenue.
Groupon´s asset structure is impressive. The organization possesses very limited range of fixed and physical assets. It is, however, recognized through its intellectual capabilities and technological base that contributes towards the growth of the business. To respond to the claim about Groupon being simply an email contact base in terms of business proposition, we should look at what Groupon offers to its B2B customers. First of all, all B2B customers receive access to statistical data about the clients that purchased the voucher. The structure of the data reports allows measuring customer satisfaction, geographical and demographic distribution of the customers, percentage of returning customers and other factors, that a lot of partners otherwise would not have access to. Groupon, of course, first of all is a large customer database, but it comes together with such benefits as quick access to the target market, fast sales and liquidity rise and strong marketing tool to introduce new companies or promote existing product at relatively low cost.
Facebook is a social networking tool and, while, on one side, it represents competition for Groupon as a sales channel, it also serves as a data collection tool for the email and customer base used by Groupon. When a user becomes part of the company´s community on Facebook, he agrees to give access to information and permission to include him into various promotional campaigns and distribution of emails. Facebook, in this case, also serves as a channel to connect existing customers of partnering business with Groupon. This connection channel generates cross-sales opportunities. With that in mind, it is possible to conclude that the actual loss based on operating in competitor´s environment is much smaller than the net benefit of Facebook.
While classified advertisement is not the core business for Groupon, one of the impressive aspects of its business model is the opportunity of diversification without high switching costs from B2B as well as B2C customers. The core proposition of the company is based on discount search and good deals, which obviously attracts certain customer category, seeking for immediate opportunities. These customers have much more open mind for side opportunities, and it makes them a good target for classified advertisements. Groupon, in its turn, benefits from attracting B2B businesses in rental apartments and can generate additional revenue at very low cost.
Business – Groupon – Business Model is relatively new for Groupon in the United States. It is, however, already tested in such market as Latin America. Benefits of fast profit and recognition are now realized not only by direct consumers, but by businesses themselves. One of the good examples of Groupon B2B deal is sales of industrialized alarm system, whereas Groupon Business partners sells this service to companies interested in purchasing or changing their current security installations. Another example is corporate training that one company offers with discount for other corporations. These corporations generally aim to provide training for their employees at a lower cost. These are just some examples of growing B2B business segment, and it probably will grow at a fast pace in the future to leverage reducing market opportunities in B2C service (Smith, 2011).
Smith S. (2011). ‘Groupon Extends Daily Deal Model to B2B’, Min The Magazine Brand Leaders, 8 March 2011. Retrieved 12 January 2014, http://www.minonline.com/news/16622.html