Groupon adds interesting twist to the business model

Groupon adds interesting twist to the business model

I received an interesting email from Groupon enticing me to join the Groupon VIP program.  The program offers Groupon users the option to:

For $29.95/year, Groupon users can upgrade to this service.  At first glance, this program looks like a nice revenue enhancement to the Groupon business model.  Thirty dollars per year per user to deliver items that cost little or nothing.  With millions of potential buyers- Way to go Groupon!

On the flip side, if I were a Groupon retailer, I might not be as excited about the program.  Groupon asks retailers to discount to extra-deep levels as well as split any money received.  The only upside of the Groupon deal is the money received for unused Groupons.  From the retailer’s perspective, these unused Groupon help to offset the super-deep discount.  Now Groupon is throwing the retailer under the bus and refunding the unused moneys.

There also may be an issue with extension of the deals past sold-out status.  Everyone has heard the stories of retailers being driven to the breaking point by Groupon deals.  Now Groupon can potentially pile on past the breaking point.

My guess is that retailers will gripe about this program, but continue to use Groupon.  The retailer knows what they are getting into when they sign up for a Groupon deal.  This VIP program is a new and creative revenue stream for Groupon that should not negatively affect existing revenues.

Groupon has endured significant criticism of their business model.  Let’s give credit where credit is due as this program is a solid business model innovation.

My instinct is that Groupon is not done innovating their business model.  Cheap food and massages are great, but the model currently is just 21st century coupons.  However, Groupon is also collecting massive amounts of data for an attractive customer segment.  Before long, Groupon will have significant data on:

Do you agree that Groupon has more upside than just electronic couponing?  Do you think this VIP program is a good idea?


Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

© 2009-2013 Business Model Institute .com - All rights reserved.