Is Groupon Doing Things Right?

| July 5, 2011 | 0 Comments

GROUPONThis just in… consumer spending hit a 20-month low.  Not the best news for our struggling economy.  But there’s a silver lining to this story.

Despite the struggling economy, smaller companies are finding new ways to increase sales.  Savvy business owners are changing the way they do business… and jumpstarting revenue.

So how are they doing this?

I’ll get back to that in a minute.  First, let’s take a closer look at a company generating a ton of buzz in the market…

By now, many of you have heard of Groupon.  Just recently, the company announced they’re going public, offering an IPO valued at nearly a billion dollars

What’s more, the company is expected to be valued at nearly $20 billion by the time all the smoke has cleared.  Now that’s a really big haul!

Here’s the thing…

Groupon has become a marketing powerhouse in a very short time.

You see, when the company started they didn’t have the resources to compete with larger advertising and marketing firms.  So instead, they wisely took a different tact. 

Groupon created a business plan focused on smaller companies and local merchants.  They targeted business owners they could work with to help grow their businesses.

But, they needed a way to penetrate the local market in a different way – a plan that would draw in customers without charging a bounty of cash.

And that’s just what they did!

Groupon brought a unique opportunity to these companies… unlike any other marketing firm.  Instead of charging fees up front, they only take a portion of what the merchant made on each sale. 

Not a dime was spent by the small business until a sale was made!

That’s the “it” factor here… Groupon carved out a giant slice of the market, doing something a little bit different. 

So, let’s get back to how small business owners are finding ways to increase sales in a tough economy…

Many companies are using Groupon to drive new business… and profits. 

Groupon and the merchant strike a deal and plan a few day e-mail marketing blitz.  Hundreds of thousands of e-mails are sent out advertising a special… sometimes as much as 50% off retail prices. 

Make no mistake, that’s a huge attention grabber!

Merchants sell a boatload of product – Groupon makes their cut – and the new customer gets a great deal.  A triple win!

This marketing method is incredibly powerful and drives new customers to restaurants, spas, and many other companies reaching out for new business.

Now here’s the really cool part…

A company can introduce their goods and services to new customers… those who may not of known they existed.  It’s true, the business owner has made a temporary price cut, but they’ve gained new customers without cutting prices across the board. 

And the net effect?

Over 70% of new customers become repeat customers!  And future sales are at full retail price.

It makes sense in challenging economic times to reel in new customers whenever possible… especially if the cost of doing business is reasonable.

Look, when Groupon’s Chief Executive Andrew Mason started the company, they were tiny.  It was nothing more than a good idea.  And now that idea has brought them to the door of an IPO worth millions of dollars.

Here’s the bottom line…

It’s no surprise that small companies are leveraging Groupon to increase their marketing power.  Small companies need great ideas and entrepreneurial spirit to thrive and grow… even more so in a challenging economy. 

Keep your eye out for smart, innovative, penny stocks  who are using the services of a company like Groupon. These types of penny stocks are the ones with the foresight to be long-term profitable businesses… and the ones you should consider investing in!

Until next time,

Brian Walker

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Category: Internet Stocks, Retail Stocks

About the Author ()

Brian joins the Penny Stock Research team as a seasoned independent trader and financial analyst. Brian graduated with a B.S. from the University of North Florida and now resides in Scottsdale, Arizona. With a background in economics and statistics, he has a keen ability to uncover profitable and growth-focused companies. He has years of real life know-how in analyzing fundamental and technical data that gives him an edge drilling down on companies and financial results. With over 15 years trading experience, Brian has become an expert in the ever-changing equities markets. Today, he scours the markets hunting for penny stocks that offer low risk and high reward.