Groupon Growth Strategy – Launch and Growth Case Study
The deal-of-the-day website Groupon launched in November 2008 in Chicago. It now serves merchants in 500 markets spread over 48 countries. When the company filed for its IPO in 2010, it cited $713.4 million in revenue, up from $30.47 the previous year for a staggering growth rate of 2.241%.
How did they do it? By turning every user into a marketer. Sharing is so integral to the Groupon experience that it has been described as a strand of the site’s “DNA,” an element hardwired into the site’s core concept.
Sharing on Groupon is largely motivated by self-interest. Consider this scenario. A user finds a great deal, but not enough people have signed up. Only half a dozen more and you can get that great price! What are you going to do? Tell your family and friends and followers and anyone else you can think of. You want the deal. Groupon wants the users. That’s a huge win/win, a brilliant growth strategy for the site, and a point of leverage for businesses.
If a single purchase is a good offering, a package for multiple people is even better. The business attracts more interest and Groupon gets more potential users. As this ecosystem has evolved, it’s an interesting mix of shared benefits with an element of chasing after bargains that deal hunters find irresistible.
Once a user has purchased a deal, Groupon sends them a daily email to keep them looking at offers without having to think about actually visiting the site. The ongoing contact is sufficiently low key as to not be perceived as inbox spam, which users hate. For emails to overcome the danger of being perceived as a nuisance, they must carry a real value proposition and be respectful. That’s a difficult balance to strike, but Groupon does it right.
As if these strategies were not sufficient to turn every single Groupon user into growth promoters, there is also a referral system. For every referred user who actually buys a deal, the referrer earns $10.
Not surprisingly, since January 2010, the largest number of referrals to Groupon come from Facebook sharing activity. There is also the option to buy for a friend to give them a taste of the Groupon experience as a gift.
By optimizing opportunities for social sharing and offering high value deals, Groupon built a thriving user base that the company estimated at 42.6 million in June 2013. (That number reflects customers who purchased a deal in the previous 12 months.)