Groupon Strategy Essay

1021 Words5 Pages
1. How have companies like Groupon affected the pricing strategy of firms? Historically, companies have issued coupons in order to attract new business or irregular customers that seldom purchase a company’s products and/or services, with the hope that they come back more often. This is consistent with the idea that getting new customers is more expensive that maintaining a customer base. Companies’ approaches when issuing coupons have usually been one of three: 1) taking a small hit (loss) in order to stimulate subsequent buys (“loss leaders”), 2) incentives and bonuses (free items when another one is purchased), or 3) making a lower profit, but nevertheless a profit, by issuing price discrimination coupons. All in all, these…show more content…
For these consumers that didn’t or maybe couldn’t find the best deals, the best deals and finding them, making the purchase experience fast and convenient. And even for free, if enough of your friends buy a deal you recommended to them. In this sense, the buying experience has become a more interactive, social experience, where the best deals and shared and echoed online. This is making customers exponentially smarted, maybe not about the true cost of products and discounts, but certainly about what they and their friends are willing to pay for them. Groupon has also broadened the standards of what consumers are willing to spend money on, especially when it comes to more unusual experiences that were not part of a buyer’s purchasing habits. As long a the price is low enough, Groupon is making it possible for consumers to spend their money on great deals for, likely, unnecessary but gratifying experiences, sharing with others the buying experience and, who know, a hot air balloon ride.

3. What is the downside for firms using
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