Groupon: What Is Groupon and How Does It Work?

The Groupon logo is displayed on the company's website June 2, 2011.
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Groupon is a deal-of-the-day recommendation service for consumers. Every 24 hours, Groupon broadcasts an electronic coupon for a restaurant or store in your city, recommending that local service while also offering you a 40% to 60% discount if you purchase that service.

Why Does Groupon Do This?

Groupon is a middleman service that promotes your city's restaurants and stores. Groupon encourages people to try a different restaurant or store each day, and earns a commission whenever they successfully refer a customer.

How Does Groupon Work for the Customer?

Groupon itself is a free service for you and me to join. Each day, Groupon will send an email announcement to its subscribers, describing the deal-of-the-day in that metro area. Commonly, the deals are 50% discounts at a particular restaurant, or 50% discounts at a particular store. If you like the deal-of-the-day, then you purchase an electronic coupon directly from Groupon using your credit card or PayPal account. You print that coupon, take it to the restaurant or store, and redeem it for commonly double the value you paid.

How Does Groupon Work for the Seller?

Groupon is a commission-based middleman service. They provide a motivated customer base to the seller, and a promise to achieve X number of sales per day. If Groupon doesn't meet that promised quota, there is no need for the seller to provide any discount services, nor any commission pay to Groupon. Much more common, however, is where Groupon exceeds their quota of daily interested customers, and then all of the Groupon customers enjoy a half-price deal while the seller enjoys a big rush of new customers, and Groupon earns a commission from the sales. (As of this writing, Groupon earns a commission of 50% of the coupon sell price). It's a very powerful win-win situation for all 3 parties.

What If I Don't Like the Deal-of-the-Day?

Then you do nothing, and wait for the next day's offer. There is no obligation nor any cost for you to simply watch each day's Groupon announcements. These announcements arrive in your emailbox once per day.

Why Is Groupon So Popular?

Groupon is very popular for two reasons: Firstly, its subscribers are modern consumers who love to spend money. They especially love to spend money where they get a discount or a perceived bargain. Groupon works because it provides motivating choices for its motivated group of consumers.

Secondly, Groupon can easily become viral, and its daily discounts spread quickly through email. Groupon subscribers like to forward the deal-of-the-day as recommendation links to their friend. In a world of social media and online personal suggestions, an email suggestion carries a lot of clout. Groupon subscribers are even given a $10 incentive to refer friends, so people are extra motivated to spread the word about Groupon to their personal networks.

There's Got to Be a Catch with Groupon. What Is It?

The only catch is the time-limited nature of the Groupon discounts. Once a deal is announced, it will only remain online for 24 to 72 hours, after which the discount will no longer be available for purchase. The coupons themselves are valid for commonly 6 to 12 months after you purchase them, so there's no rush to redeem the coupon the same day. Like any form of sales, the provider wants to make it urgent for the customer to purchase, so when you see a Groupon deal that interests you, definitely jump on it within the next two days.

Which Cities Is Groupon In?

Groupon is growing quickly. You can find Groupon deals in nearly any major city in Canada and the USA. Groupon is also quickly growing in Central and South America, Australia, the UK, Europe, Asia, and parts of the Middle East. There is tremendous consumer appeal for what Groupon offers.

Where Can I Learn More About How Groupon Works?

You can read about Groupon and its policies on the website

How Do I Join Groupon?

Join Groupon by signing up on the website. You simply need an email address which you will check every day for discounts.