Groupon and Groupon Now: Participating Firm’s Profitability Analysis

Abstract

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). A new business model called "Flashon" is proposed to be distinct from Groupon in that Flashon is dynamic and real-time. This model is more responsive to business fluctuations-firms may choose to offer deals during business downtime and likewise withhold deals during business uptime.As and when deals are offered by firms, consumers receive deal notifications real-time. A time-continuum model for profitability analysis based on the two-period Groupon model developed by [Edelman et al. 2014] is introduced for systematic comparison of the profitability between Flashon, Groupon, and firm normal operations without offering discount vouchers. Simple case studies of the customer-demand fluctuations of different business cycles show consistant results that the Flashon model is more profitable than the Groupon model, which are both superior to the firm normal operations without offering any discount vouchers. This is given that the consumers are generally interested in purchasing the firm products or services and can be easily stimulated with attractive incentives such as the discount vouchers. The profitability analysis also provides quantitative proof that offering high discount rates or even free products or services with added values to small target fraction of the population may attract more consumers and hence generate high profit for participating firms with high popularity among the consumers.

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