Groupon is a “deal of the day” website where customers can sign up to learn about one deal per day for a local business. Maybe I should rephrase that. Groupon is a $1 billion company capitalizing on recession shopping behavior and viral / social media marketing.
Three things make them special:
- Customers purchase the deal on the website (whether it’s a a cruise or an end-table), letting businesses sell goods online they otherwise couldn’t.
- The deal only kicks in if a threshold of purchasers is reached, so customers who really want the deal forward it to all their friends (and why shouldn’t they, it’s a great thing to share).
- If the threshold isn’t reached, the vendor’s deal doesn’t go into effect.
All of this means that vendors can offer unbelievable discounts at volume, which is what makes discounting profitable, while minimizing risk. And customers get great deals with an easy way to pay. Everybody wins.
Up until now, this was just for local businesses. But yesterday, The Gap ran a national deal on Groupon and sold 300,000 packages ($50 of merchandise for $25) in one day.
That’s $7.5MM of instant revenue for The Gap off the bat – or a $7.5MM loss when the deal is redeemed, if that’s how you want to look at it – but no one goes to The Gap to spend just $50; the promotional effect must be tremendous.
In the words of Olivia Doyne, Director of Engagement Marketing at Gap:
“We’re always looking at new and innovative ways to connect with our customers, and we know many of them are Groupon subscribers. We thought the timing of our exclusive Groupon offer would be ideal as people begin to build their back-to-school and fall wardrobes.”
At its core, there’s nothing all that new about Groupon. But smart implementations of simple ideas can revolutionize the way we shop.