Designing Promotions in the Internet Age: Groupon’s Five Key Lessons for All Companies

There is an interesting experiment happening on the web - where Groupon.com is putting out one deal a day, in sixteen cities across the USA.  They launched three new cities - Miami, Philadelphia & Austin -- this week, and hope to be operating in over thirty by year's end.  On September 8th the deal in Boston was "$75 for $175 worth of Designer Handbags & more at Hayden-Harnett Online" - and as of 7:58 AM EST, Groupon had 11 people who have already given their credit card and were ready to buy the Groupon coupon.  The rest of us could join and collectively we had until midnight of the same day to recruit enough to total fifty participants - and then we all got the deal!  If we did not reach fifty, the deal was gone, and no value was exchanged.  The firm's video on "how Groupon works" gives you the idea. 

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The company's aim is to help introduce people to your store, restaurant, service, or other retail or wholesale establishment.  Groupon makes money by keeping a share of the discount.  In the above case Hayden-Harnett Online might split part of the money collected for the coupon, i.e. it would be a portion of the $75 paid for the $175 in value.  In conversation with their customer support function, they report that they have doubled in the past few weeks, and you can see them for yourself on their live web cam.  They started in November of 2008, and now have 80 employees, and 675,000 email subscribers growing at 40-50% per month.  They hope to exit the year with over a million. 

This site was recently reported by Jennifer Van Grove on Mashable, and some of the comments said that this couponing idea was old news, as there are many other coupon aggregator sites including Daily New Deals.  But I think these traditional coupon sites are very different because they provide lots, and lots of choice.  Groupon is focused: one deal, each city, each day. 

Buy With Me, is another group buying site, but Groupon does a much better job - in my estimation - of making the participation process easy, and the offer alive.  As I have written about before, too much choice stifles decision making.  For me, Groupon is to couponing what iTunes is to music buying - clean, simple, and exciting. 

There are five key lessons for every company to take away from the Groupon site:

  1. Make the interaction super simple - one deal, one day, one city.  What could be clearer?
  2. Create a sense of urgency in your customers.  If there are not enough people by midnight, the offer disappears.
  3. Energize your customers to get other customers.  Good word of mouth is useless unless it turns into sales. 
  4. Make it fun!  Groupon's tone is upbeat, enjoyable, and does not have that yet-another-boring-coupon feel.
  5. Make it fresh.  Every day has a new deal for each city!

The obvious question to ask yourself is in the myriad investments any company is making online, is there a simple, engaging, fun, fresh, daily interaction aimed to energize their customers relationship with them?  If not, now's the time every firm should start designing it, or if you are a blogger, what's your daily deal?

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