How does Groupon Work



Groupoun is a group buying website which offers huge discount on everything from Spa, to teeth whitening to meals. Everyday Groupon features a unique deal which becomes active only if a minimum number of people purchase that deal.

This business model has become a rage and has made Groupon the fastest growing Internet Company in the history of mankind. Its growth rate has exceeded that of Google and Facebook. This has given rise to a lots and lots of clones, LivingSocial etc are some companies imitating the Groupon model.

So how exactly does it operate. What does it take to run a business like Groupon.

Groupon generally serve 2 audiences
1) Users: People who buy from their website
2) Merchants: Businesses which sell through groupon

Groupon’s main aim is to provide users with interesting deals which they cannot find anywhere else. At the same time the featured deal is activated only after a minimum number of purchases. This gives users the incentive to share the deals with their friends thereby making the whole process social and viral.

The deals last only for 24 hours , it creates a sense of urgency and gives rise to impulse buying.

Their main form of advertising is Email marketing. Groupon sends daily email newsletters featuring best deals around the city so that user gets fresh deals in their inbox. The deals offered are so unique and interesting that they have one of the best email open rates.

So if one has to start a daily deals site, make sure that you have something to offer to users, give them something which they value and they will love you for that

But why do merchants love groupon? Well that’s a topic for another post.

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