A1 Research

JUNE 17, 2011

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Groupon

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and the Collective Buying Phenomenon

Jeanne Wallace

What’s the big deal? Never knew that question could amount to so much. Now, everyday when I log into my email I’m face-to-face with a marketing concept that answers the question for me: Groupon.com. The site offers daily deals of “the best stuff to do, see, eat, and buy” in my

city. Each deal is designed in a tempting, humorous, and creative way. Sometimes, I bite at first site. Average savings per deal equals 60%! Often the deal is something I’ve thought about | |

trying and never seized the chance. Timing, | Groupon Deal: For $12, you get $24 worth of fresh, in-stock cakes at Larsen's Bakery in Racine. |

savings, and the opportunity to try new things with others are triggers that make it easy for the finger to click on “buy”. Daily deals have become an Internet frenzy driven by Groupon. Let’s find out how and why this marketing concept has caught on.

The concept of collective buying

In the late 90’s, MobShop.com was a group-buying site where consumers could add might to their buying power by coming together as a group. The site was mainly built to gather enough customers to have the purchase power to drive a price down on electronics or video games, as an example. It was a great idea at the time, however, MobShop discovered that it took too much time to get people on board for the deal. Many did not want to wait. The customer base was too diverse. Often, the deal fell apart.

ThePoint.com shared a similar collective approach. However, its focus was on raising money, organizing people, working for change, and basically anything that required mass participation. Figure 1 describes an example of a campaign sponsored through ThePoint. Andrew Mason was the force behind ThePoint. Andrew Mason was living and working in Chicago.

His parents came for a visit and to take...