Like many established companies, Groupon is facing future challenges that may ve

Question

Like many established companies, Groupon is facing future challenges that may very well jeopardize their competitive advantage in the marketplace. Taking into consideration changes in consumer behaviors; how Groupon’s Promise affects the consumer’s perceived risk and cognitive dissonance; the five-stage purchase decision process for a typical Groupon user; and the psychological and sociological influences on the Groupon consumer purchase decision process, you, a member of the corporate marketing team are tasked with developing a formal recommendation on what actions the company should take to address each challenge.

Explanation / Answer

The Groupon promise is that “any customer can return a Groupon, no questions asked even if they use it-if they feel like Groupon has let them down.” The Groupon promise will limit if not totally disengage a consumer’s perceived risk and similarly cognitive dissonance for they will not have anxiety if they are not pleased with the product or service there will be no negative consequences.

The five-stage purchase decision process for a typical Groupon user would consist of Problem Recognition: This would be prompted by a Groupon deal-of-the-day e-mail offer for something that a potential consumer wouldn’t normally do.

Information Search: A Groupon offer can initiate an “internal search,” where the consumer might reflect on prior experiences with merchant making the offer. Also, a Groupon offer can activate an external search, leading to on-line comparisons with competitors, or discussing the offer with friends on social media such as Facebook or Twitter.

Alternative Evaluation: Many Groupon consumers may focus on price as the most important aspect inthe evaluation, although other aspects of the offer, such as quality or time restrictions, can also apply.

Purchase Decision: The purchase decision is made online and then confirmed when the deal “tips” or reaches the goal number of buyers.

Post Purchase Behavior: After the purchase and use of the Groupon offer, consumers compare the purchase and use experience with their expectations and are either satisfied or dissatisfied.

The possible psychological and situational factors that influence the Groupon users’ purchase behavior by knowing that the typical Groupon user is an 18-34 year-old woman with an average income of about $70,000. This is significant because this group’s affinity to social media enables the use of Groupon, which depends on e-mail and smartphone apps to reach its customers. Specific situations, such as planning entertainment activities, finding a close restaurant for lunch, or buying a gift, are also common to Groupon users. As Groupon has learned more about its subscribers, it has begun personalizing the deals they see. The company uses variables such as gender, location of residence or office, and buying history to match deals with the customers. This process provides offers that are more likely to be of interest to consumers and allows Groupon to serve more merchants.

Groupon faces three challenges in the future; Groupon use and repeat purchases, rapid growth, and competition.

Groupon use and repeat purchases:Some consumers buy the coupons but never use them, eventually leaving them dissatisfied and unlikely to use Groupon again. Some consumers use the coupons but do not become regular customers. Because of the deep discounts used to sell the coupons, most of the deals are not profitable for the merchants, so they are dissatisfied if the Groupon users do not make repeat purchases. In order to fix these problems Groupon could send reminder messages to the buyers of the Groupons before they are going to expire and offer incentives o the consumers so that they may become repeat customers of the merchants.

Rapid Growth:Groupon has expanded into many new countries with their local daily-deal services. Currently Groupon has more subscribers abroad than in the U.S., although more deals are still sold in the U.S. As a result Groupon can take initiative to learn and understand the different buying behaviors internationally.

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