Thursday, November 10, 2011

Dr. Groupon and Mr. Hyde

Today we have two different portraits of how Groupon does business: on the one hand, the daily deal pioneer takes pains to ensure its customers -- the people who actually purchase Groupons -- have an engaging and pleasan experience.

On the other hand are the merchants who participate in offering deals who complain that they don't get payment from Groupon fast enough, and that the company uses their money to keep its cash flow going.

The question I ponder upon reading these contrasting accounts is, who are Groupon's real customers: the consumers who buy up the deals they offer, or the businesses that partner with Groupon to provide those deals?

I've discussed before the dynamic between the media, their audience, and their advertisers. As the reader of a newspaper, I am not the true customer: I'm the product whose attention the paper sells to its advertisers, who bear the true cost of publishing the paper. (For the most part, what I pay for a subscription is nominal compared to the cost of production.)

This isn't a perfect analogy for Groupon, since the consumer actually does fork over the cash that pays Groupon's bills. But the merchants are customers, too, because they forgo a large portion of the profits on each sale in exchange for Groupon presumably expanding their businesses' own pool of customers. I don't have any first-hand knowledge, but most accounts I've read indicate that Groupon doesn't do a great job of ensuring that this group of customers -- without whom Groupon would not have a business model -- have a good experience, and want to sign on for more.

Maybe Groupon needs to spend less time on the cheeky prose, and more time on old-fashioned relationship building with the people who have made them what they are.*

*a largely overvalued, unprofitable Internet company.

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