Friday, August 27, 2010

Selling Out? People Question Groupon's Strategy

Groupon runs a wildly popular promotion for national retailer The Gap, and suddenly, people begin to question whether the firm is "selling out." Wow. We have always seen these types of questions emerge as young firms grow and expand beyond their original core customer base, but it seems that these types of questions are cropping earlier and more often in the social media age.

I think an important distinction has to be made when we observe young firms beginning to expand their horizons. The critical question should be: Does attempting to expand in this way somehow compromise the experience/service/value for the company's core customers? If so, then we can rightfully question the growth strategy. However, there may be many situations where attempts to expand do not compromise the value and experience for the original consumers. In those cases, I think it's unfair to argue that a firm is "selling out" in any way.

Another important point should be made here. Firms can and should experiment as they try to formulate their growth strategy. As noted in the article cited above, Groupon has viewed the Gap promotion, and a subsequent Fandango promotion, as experiments. That's good solid management. Firms should test out various growth options, rather than diving headfirst into an expansion program. As customers, we need to scrutinize our favorite company's moves, but we also have to willing to tolerate some level of healthy experimentation.


Luke Bornheimer said...

I think you make a great point, and if we look more broadly at Groupon's "sector" with firms such as LivingSocial and even Yelp entering the market recently (, one can clearly see that the market is getting very crowded and if anything, firms NEED to be growing their product-line as Groupon is, otherwise they may lose their competitive advantage.

I think the bigger threat to Groupon is that, despite its great product and fan-following, an entry by a more established site, such as Yelp and/or Facebook (if they so chose to do so), could spell LOTS of trouble for Groupon.

A great example of how this might effect Groupon can be seen in Facebook's recent launch of Places, a clear copy of Yelp's 'Check-in' service, which was a clear copy of Foursquare's 'Check-in' service. Though Foursquare AND Yelp both appeared at Facebook's 'Places' Launch event to speak about working with Facebook, one can only imagine the panic that's happening at Yelp/Foursquare headquarters.

One major push by Facebook into the community-coupon market could spell REAL trouble for Groupon...

Michael Roberto said...

Great point. Could a deal be in the making? Are they an acquisition target?