Groupon’s Big Break: The Recession

Groupon’s Big Break: The Recession

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The recession has brought out Americans’ penchant for a bargain, and no company has capitalized on this more than Groupon, the deal-a-day website that has grown at an astonishing rate this year, from 3 million users in January to over 20 million today, just 10 months later. Groupon, which launched barely two years ago in the middle of the recession, has never known life outside of tough times.

And tough times have boosted “the fastest growing company ever” according to Forbes.  Every morning, subscribers receive a deal in their inboxes for a restaurant, spa, activity or other attraction in their designated city. If enough people purchase the deal — which is almost always at least 50 percent off the normal price — the deal is “on.”

“It doesn’t make sense that the fastest growing company ever would happen during a big recession, but it is,” says Rob Solomon, Groupon’s president and COO. He credits the appeal from both the consumer and business ends. “Consumers are always looking for great value,” he says. And yes, it’s kind of an obvious win-win situation for customers — I personally have received $40 worth of food at an Indonesian restaurant for $20, and $85 worth of wine for $40, both no-brainers — but what’s in it for participating businesses, who offer their products at deep discounts, and give a substantial cut of even that price to Groupon?

In a word, exposure. In Chicago, for example, Solomon says that businesses who participate “get exposed to double the circulation of the Tribune.” He adds that the Tribune and other old media are no longer effective, and that “a lot of the online solutions didn’t work too well either.” He says that the Groupon model works because “they aren’t paying anything to advertise on Groupon.… It’s pure performance-based marketing.”  Solomon acknowledges that the Great Recession may have helped Groupon get off the ground. In times like these, people are particularly aware of the value of the dollar, while at the same time reluctant to give up previous standards of living. “I think especially in a recessionary time, [consumers] have to skimp, but they don’t want to suffer,” he says. And for businesses, “This is a time when they need customers more than ever.”

Still, Solomon is confident that the Groupon model can be successful in any economic climate. “We think that whether it’s recessionary times or good times, that the model will probably work. We haven’t proven that yet, because we launched in recessionary times.” Hopefully soon, they’ll get their chance.

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