Groupon and Groupon Now: Participating Firm’s Profitability Analysis
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The business model of Groupon has been categorized by many to be a case of daily deals or discount offerings to consumers. It is static (not responsive to business fluctuations and demands) and operates in batch mode (period-based availability). “Groupon Now” was proposed to be distinct from Groupon in that Groupon Now is dynamic and real-time. Groupon Now was conceived to be more responsive to business fluctuations—firms may choose to offer deals during business downtime and likewise withhold deals during business uptime. In this study, a time-continuum model for profitability analysis based on the two-period Groupon model developed by Edelman (Mark Lett 15, 2014) is introduced to compare the profitability between Groupon, Groupon Now, and firm normal operations without offering discount vouchers. The numerical experiments show consistent results that Groupon Now is only marginally more profitable than Groupon, but both are superior to the firm normal operations without offering any discount vouchers. The latter analysis is especially true if there is a high consumer demand to fulfill and the firm’s product or service is a popular consumers’ choice. Furthermore, the numerical experiments also suggest that firms offer moderate discount rates (\(\gtrsim \)50%) in large portion when their products or services are less well-known or less popular; and use moderate discount rates, deep discount rates (<50%), or both for price discrimination when their products or services are well-received by consumers.
KeywordsVoucher discounts Deep discounts Groupon Groupon Now Value proposition Customer heterogeneity
The first author would like to thank Xiaolu Hou from School of Physical and Mathematical Sciences, Nanyang Technological University, Singapore for helpful discussion on this work.
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