REPORT PREPARED FOR: Groupon REPORT TITLE: Business Model Analysis   BY: Go Digibonkers POSTGRADUATE DIPLOMA IN BUSINESS APMG 8119: DIGITAL ENTERPRISE 2015 By Shari Grenz, Himesh Trivedi, Viraek Cheu, Pooja Cornelius and Swati Chawla Use title slide layout

Conclusion & Recommendation Agenda 1 Business Background 2 Revenue Analysis 3 Cost Analysis To achieve a new layout – insert a new slide, then in the slide thumbnail left side view, Right Click, choose layout – and pick a content style to use 4 Value Proposition 5 Conclusion & Recommendation

Business Background Headquarters: Chicago, United States Founded: January 2008 150 markets in North America & 100 markets in the rest of the world 40 million customers To achieve a new layout – insert a new slide, then in the slide thumbnail left side view, Right Click, choose layout – and pick a content style to use Shareholders: Mainly American investment companies Declined $6 billion takeover offer from Google

Customers Merchants Featured deals, coupons Goods Risk free promotions Business Background Groupon offers a variety of deals on various goods and services. Featured deals, coupons Goods Customers Risk free promotions Motivated customer Merchants To achieve a new layout – insert a new slide, then in the slide thumbnail left side view, Right Click, choose layout – and pick a content style to use

Business Model - Process Customer redeems coupon at Merchant Groupon features deal Merchants sign up Deal reaches public Customers pay Groupon To achieve a new layout – insert a new slide, then in the slide thumbnail left side view, Right Click, choose layout – and pick a content style to use Groupon pays Merchant Share Customers sign up

Canvas Business Model To achieve a new layout – insert a new slide, then in the slide thumbnail left side view, Right Click, choose layout – and pick a content style to use

Revenue Generation Source of Revenue Explanation Local Deals Revenue derived from partnering with local merchants such as restaurants, parlours etc on a 50:50 partnership. Goods Revenue derived from the sale of various merchandise such as electronics, clothing etc Travel Revenue derived from deals with travel based companies, hotels etc. To achieve a new layout – insert a new slide, then in the slide thumbnail left side view, Right Click, choose layout – and pick a content style to use

Revenue Analysis

Revenue Analysis

Risks & Advantages Risks Advantages Outsourcing Competition Inventory Dependence Large target market Expanding travel market Low overhead costs

Key Findings of the Revenue Model Revenues are mainly generated through goods and merchandise, particularly in North America. Main risk of Groupon´s revenue model is the dependence on vendors. Pure online business allows to reach a large target market and additional revenue stream opportunities.

Cost Analysis Cost of Revenues Direct + 3rd party Other expense Operating Expenses: Marketing + SGA + Acquisition 40% $1.3m Selling: Payroll + Stock Commission Others (tech, telecommunications and travel) General and administrative: Others (Depreciation maintenance, Tech…) 1% Interest Losses: FX… Legal advisory 8% $242k Refunds 43% $1.4m Inventory Shipping Fulfilment Inventory markdowns processing fees Editorial Technology Web hosting + Marketspace  Cost online rather than offline cost + Cost structure  activity base  3 costs 8% $269k Online & Offline Payroll + Stock Others (discount…)

Cost Analysis 196% & 32% Cost vs 123% Revenues Opportunities and Challenges (Groupon, 2015): Shipping and fulfilment costs  Outsourcing Acquisition  Extra ongoing cost Ticket Moster and Ideel Legal and regulatory concerns  Intellectual property claims

Key Findings of the Cost Analysis 83% of the costs are direct costs and costs for SGA, another cost driver are the costs for growth through acquisitions Activity-base cost There are a lot of potential costs e.g. for legal issues, regulatory costs. Various initiatives have been carried out in order to lower the costs.

Value Creation Value = Returns > Expenditure. The most important aim for any business entity. Creating value helps in selling products. To understand value creation understand your target audience.

Digital Tribe People with common interests and beliefs. No longer constrained or isolated by physical boundaries. Groupon - Digital Clubbers

Customer compensation Internal Organisational Perspective Context Compelling Content Coverage Compliance Customer compensation Convenience

BUT External Customer Perspective Pros Real time deals Upto 70% off Control Not a default channel to access services Choice Limited choices of products available Pros Real time deals Upto 70% off Wide range of products Comment No platform for users existing BUT Consolidation It‘s not a one stop shop service Contraption Merchant app available but no app for purchasing Combination No bundles of vouchers offered Conversation No online chat facility

Digital Equaliser

Key Findings for Value Creation Groupon´s value creation from the internal organisational perspective supports the company´s growth. Groupon doesn’t have enough customer interface, better customer care/ services will certainly improve the value creation.

Theoretical Implications Considers all nine fields of the “Business Model Canvas” Including two parts of KPMG´s framework, value proposition and the revenue model + digital tribe 20 C´s model of KPMG: Groupon fits in the 6 C's i.e. compelling content, context, coverage, convenience and customer compensation

Customer Satisfaction & Loyalty Managerial Implications & Recommendation Vendor relationships and contracts Expansion Cost by function approach Internal legal team Combination and Conversation: Bundling, online chat Choice and Comment: Choices of products, platform Increasing Revenues Customer Satisfaction & Loyalty

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