Groupon is a special type of coupon website that offers group deals to consumers. Groupons attempt to tap into the power of collective purchasing by offering a substantial discount, such as half off, to a group of people if they buy a product or service. Many restaurants and other retailers use Groupons in an effort to lure groups of customers into their establishments.
The word "Groupon" is a combination of "group" and "coupon. Unlike a standard coupon, a Groupon lets consumers pay the discounted price for goods in advance by purchasing the deal.
A Groupon previously included a "tipping point," which requires a predetermined number of consumers, such as , to make a purchase before the merchant must honor the discount. This model's design helps the business make an initial profit to cover the upfront cost of providing the service. As of , Groupon no longer requires a tipping point because most deals reach high sales volumes in a short period of time.
Consumers typically receive daily deal ads through location-specific email lists or social media sites. Each day the company advertises at least one local deal with a predetermined purchase period, ranging from a few hours to a few days.
In most cases, the discount is valid for up to six months, and the Groupon is indefinitely redeemable. Consumers use a code or printed voucher for redemption at the time of service. Since the discount is prepaid, the customer only owes the merchant for services exceeding the value of the Groupon.
The "Fine Print" section of a Groupon states the unique restrictions for each deal, such as excluded days or products; however, merchants may impose unadvertised limitations upon redemption, such as a limited menu or inflated pricing for Groupon customers. Groupon collects a percentage of the daily deal profit in exchange for providing merchants with a broad customer base through the company's extensive email list and social media presence.
The merchant can profit from the discount if Groupon customers come back, promote the business to their friends or spend more than the value of the Groupon. In a study of businesses, Rice University, Jesse H.
Groupons may be unprofitable for businesses with variable operating costs , as they often need additional staff and supplies to satisfy a sudden increase in demand. Daily deals may also attract customers outside the merchant's target audience, reducing the rate of repeat business. Dictionary Term Of The Day. Broker Reviews Find the best broker for your trading or investing needs See Reviews. Sophisticated content for financial advisors around investment strategies, industry trends, and advisor education.
A celebration of the most influential advisors and their contributions to critical conversations on finance. Become a day trader. How Groupons Work for Consumers Consumers typically receive daily deal ads through location-specific email lists or social media sites. Pros and Cons of Groupons for Businesses Groupon collects a percentage of the daily deal profit in exchange for providing merchants with a broad customer base through the company's extensive email list and social media presence.
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