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Tuesday
Jul282009

Not your mother's coupon -- Groupon taps into collective purchasing power online

Groupon is a surefire approach to help jumpstart a consumption-driven economy. Amazing deals on a diverse set of things that aren't necessary, but totally desirable. Things like facials, which normally would seem luxurious, suddenly become so reasonable that you can't help but say, "at this price, I can't resist!" There goes $50 when you were really perfectly content spending $0.

The company leverages collective purchasing power, offering a daily deal to a business in your area (selling anything from paintball to eyebrow waxing) that only kicks in if a sufficient number of people commit to the deal. Buyers are thus encouraged to spread the word to their friends, providing exceptionally quick word-of-mouth marketing to the seller. Many sellers agree to the deal not because they make money on it, but because it provides such good exposure. Each deal expires at midnight, forcing buyers to make quick decisions rather than wait and think about.

The site has turned close friends of mine into near-spammers, forwarding the daily deals to all of their friends. Amazingly, they do this not to help secure the deal, but because they legitimately think that this deal is so awesome that they just want to share it.

The deals are all pretty high end (well-recommended spas, innovative theaters) but they are often fairly new (hence why the businesses agree to the deal) so the site offers an great way to experience an up-and-coming business before it gets hot, at a discount. The deals also encourage you to try out something you've never done before or have been meaning to try, but have put off.

This is a clear part of its success -- Groupon makes coupon collecting cool. Its staff does significant due diligence on companies -- hence why it is only rolled out in certain cities -- beginning in Chicago, but now with representatives on the ground elsewhere discovering new spots. I've always hated coupons. I was slow to adopt, but now I admit that this site is mildly addictive.

By facilitating the interaction of new companies and experimental consumers, Groupon provides a great service to each. As an added benefit, Groupon actually makes money, too. It's one of those rare web companies with a natural business model that made it nearly immediately profitable -- it takes commissions, sometimes as much as 50% on deals for referring new business. This marketplace actually functions in the best interest of the business, the consumer, AND the middleman.

Flikr credit: .Uvitra

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Reader Comments (3)

I love Groupon, but I think LivingSocial will overtake it.

July 30, 2009 | Unregistered CommenterTim

We'll see. Groupon just hired 50 salespeople to develop new deals nationwide. Pretty impressive in this economic climate.

July 30, 2009 | Registered CommenterMelody

Some time before, I needed to buy a good car for my firm but I did not have enough money and couldn't buy anything. Thank heaven my friend proposed to try to take the loans at banks. Therefore, I acted that and was happy with my consolidation loan.

April 10, 2010 | Unregistered CommenterRojasKATHRYN
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