Idea of the Day: Super Saturate and Improve The Groupon Model

    

If you own a chain of restaurants, chances are good that you know other restaurateurs in your area. If you’re a salesperson for a large national mobile carrier, chances are you know marketing people at other mobile companies. It goes without saying that those who are ingrained in their industry have unique access to the people who operate in that industry.

In my morning glance through the news, one of the sites that I skim is DealPage.ca. This site aggregates daily deals from a number of Groupon clones.

I’ve been interested in Groupon and the sites that have been copying their business model for a few months now. In essence, they have taken a profitable niche on the Internet (coupons) and have created, almost out of thin air a derivative niche all their own. Talk about doubling down on traffic – Groupon saw something that worked, zagged when others were zigging, and stumbled upon a way to create a brand new, profitable genre. Impressive and worthy of study to say the least.

Of particular note, last month, I reviewed Groupon clone FabFind and their lackluster iPad giveaway.

Here’s What I’ve Noticed : The Problem That Needs Solved

As with any online niche, there are things that work and things that don’t. Those who succeed in a niche are either able to identify a breakout new direction or identify what is currently missing and fill that void. It sounds a lot simpler than it is, but I firmly believe that’s the secret to making money online.

DealPage.ca

Groupon and their clones are starting to figure out what types of businesses succeed and which ones don’t. After a short, but serious stream of bad press, businesses started to consciously consider the negative impacts of participating in this new form of coupon while Groupon and their clones started to deeply consider their customers, what worked and what didn’t.

After watching DealPage.ca and other aggregation services, it looks like certain types of deals if not specific businesses themselves cycle from site-to-site. There isn’t a lot of creativity in the Groupon clone business and for the most part, this brand new, but increasingly competitive niche has not needed to reinvent this new wheel.

What type of deals work on Groupon clones? Any business with an unlimited quantity, variable markup and the ability to schedule coupon redemption. These 3 elements underly all successful Groupon deals. This formula fits restaurants, fitness club memberships, personal grooming services, virtual good providers, etc.

This is a problem because for the most part, Groupon sites rely heavily on opt-in marketing or passive daily consumption (like I do by viewing DealPage.ca with my news). It’s easy to be presented with a number of deals that aren’t interesting to you and become desensitized to all but radical deals.

This works against what we know about opt-in marketing as well as negating value to the small business offering the discount. Opt-in subscribers are less likely to be engaged because they are being presented with un-targeted information over-and-over again. Soon, Groupon clones will only be as valuable as their current deal and small businesses will be forced to offer increasingly discounted prices to achieve the same results they once did from Groupon style deals. From engagement to exposure and beyond, the disadvantages are starting to outweigh the advantages when both customers and businesses decide to participate in Groupons.

The Solution and My Idea: Growpon

Moving past the horrible business name that contains the word “grope” in it when said out loud, the Grow-Pon idea is to leverage the newly carved out Groupon niche while breaking it down into bite-sized chunks.

  1. Create a clear list of at least 20 profitable Groupon niches. This should be easy enough. Create a Python script to scrape all of the Groupon clones you can find each and every day. Assemble the deal data into a database and connect the dots. You’ll quickly see the regular trends and how successful each specific category is. Don’t be afraid to think outside of the box either – here are some other ideas: New Mom Deals, Toddler Deals, AV Deals, T-Shirt Deals, Photography Deals, etc, etc, etc.
  2. Create an individual Groupon clone for each profitable category that you’ve uncovered. Start with Massivegroupon, an Open Source Groupon clone. Change the way that the CMS works a little so that you can manage all of the Groupon sites from a single backend administration interface.
  3. Hire a part-time sales rep for each individual site. This sales rep must be heavily involved in the industry that the site is centred around. For example, if one of the sites is a Golf Deals website, find a successful golf merchandise rep. Don’t pay these sales people an hourly wage, give them a very healthy percentage of the revenue. Keep something like operating costs (which should be very low) plus 10% for yourself. Remember that you’ll be earning money on the spread, not on each deal like the existing round of Groupon clones.
  4. Take your 10% and for the first 6 months to a year turn all of that revenue back into marketing. Work with each sales rep to define a marketing plan unique to each industry and take the successful campaigns cross-site so that your entire collection benefits.
  5. Don’t forget about the community. People who are interested in similar products and services likely have other things in common. Build some sort of community portal to engage regular visitors. It could be a forum, a Q&A site, an e-mail list, a regular uStream show, etc. However, don’t forget that communities are the single most valuable component to ecommerce (in any form) these days.
  6. Build a series of DealPage clone aggregates that primarily list deals on your network of sites and pepper in good deals from traditional Groupon clones. On this site, allow people to draw a travel radius circle on a Google map and save that data. Show users deals across niche sites wherever they’re willing to travel. Rather then breaking it down with simple geography (such as Toronto), allow people to view deals in multiple regions simultaneously, but only for your network. If you’re a bit shady, collect geo data and package it for sale to research firms.
  7. Before traffic plateaus, but while it is still growing, broker a half decent advertising deal with an online network. Use all of this income to double down. Build out regionally and duplicate high earning sites with the same formula to scale and saturate the market. Paying straight commission and having a scalable, combined backend will ensure that costs aren’t an issue and are tied directly to performance.

Summary

My idea to refine the Groupon market is somewhat built on Groupon’s new product, Groupon Stores. However, I don’t think that they implemented this new product properly and rather then creating a shopping mall, had I been Groupon’s Product Manager, I would have had a closer look at what worked and why before trying to break out a new product.

This idea builds on networks of people. It starts by identifying customers and what those customers have purchased. Next, people already ingrained in each niche are given the opportunity to leverage their networks to extend real value. Beyond MLM (multi-level-marketing), this is truly an opportunity without risk. Last, similar services and cross-vertical regional products are combined to engage customers in the products and services they’re interested in, where they are interested in purchasing them.

Startup costs are exceptionally low for this idea. A one-man operation, this idea requires a little bit of technical know-how to pull off without incurring more than a couple of hundred dollars in costs. If programatic changes can be made to Massive Coupon and graphic design can be implemented without hiring out, all that is required are basic hosting costs ($20 a month to start) and the ability to identify, manage and recruit the sales people needed for each site.

What Do You Think?

Ideas are worthless. Execution is everything. I occasionally have a bright idea that I think will work and post it here. Usually in a flurry of keystrokes, I write fast and think little while I transcribe a thought bubble.

Am I on the mark with this? How would you change my idea? What will make it work well?

 

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Date Published: 04. Nov, 2010
Categories: Groupon Clones, Ideas, Internet Industry
Number of views this week: 903