Groupon is a marketing service that offers its subscribers daily discount coupons by email, Facebook and Twitter feeds. Typical Groupon deals focus on local restaurants, stores, services, events and regional products. Today, there are thirty-five million registered Groupon users worldwide.
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The name Groupon is a combination of the words "group" and "coupon," which references the company's viral marketing business model. The goal of a viral approach to marketing is to encourage Groupon members to pass marketing messages on to other sites and users, creating a potentially exponential growth in the message's visibility and effect. Groupon’s deals are only offered for a certain amount of time -- typically twenty-four hours -- and a discount coupon will only become active if a pre-determined number of people commit to purchasing the advertised product or service.
Once the tipping point is reached, the discount voucher -- which can be printed out or presented on a mobile device -- becomes available to everybody, even if they are not Groupon members. If the tipping point is not reached, Groupon cancels the deal and the original people who signed up for the discounted purchase get their money back. The tipping point is there to ensure that Groupon's business partners receive an agreed-upon number of customers before committing to the discount.
To be featured on Groupon, a business must commit to turning 50% of their profits from the advertised deal back to Groupon. Companies that offer services similar to Groupon include LivingSocial and BuyWithMe.
This video illustrates why small businesses are using Groupon for marketing.
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