The two-and-a half year history of the online deals company Groupon is a perfect example of what a new business should do to succeed in the marketplace. It’s also a history of what a company should never do.

Groupon was created in 2008 by Andrew Mason, who took a simple idea to an new level. He wanted to help small businesses attract new customers by sending out coupons and daily deals via a subscriber list. In less than two years, Groupon spread to 100 cities and 25 countries. Forbes magazine said that Groupon was the first company to exceed $500 million in revenue in its third year as a company when it reported $713.4 million in revenue in 2010.

After this huge spike in popularity, Groupon proceeded to go downhill over the course of the past year. Here’s a list of where Groupon went wrong so that your business won’t follow the same pattern.


The incredible popularity and interest that consumers displayed for Groupon was outstanding, and all types of businesses started to notice. Living Social,, and Google created copycat companies to compete with Groupon’s pioneering efforts. Even businesses such as Nordstrom started their own daily deals.

When intense competition like this occurs, a key factor for your business is to maintain the quality of your business against the others. Groupon failed in this aspect when customers began commenting on how terrible the offerings and quality were.

Customer Service

Hundreds of terrible reviews for Groupon’s offerings exist throughout the web. Customers have reported that it has taken weeks for some services and products to actually come through after they placed their order via Groupon. The essence of Groupon is making the Internet and social media easy outlets for coupons and deals, but Groupon hasn’t executed this philosophy in full. As a company, it’s failed to take into account that poor publicity can spread across social media just as easily as good publicity can.


Many businesses were initially attracted to the thought of using a daily deals site such as Groupon to attract more customers, but many ended up losing profits instead. Restaurants typically offer $50 worth of food for the Groupon price of $25 but only gain an average of $12.50. This doesn’t even cover the cost of the food.

A blog-post-gone-viral by Jessie Burke, who was disappointed in the Groupon outcome, states that using Groupon was, “the single worst decision I have ever made as a business owner.” Keeping your clients happy with your business is absolutely critical if you want your business to grow.

Inside the Company

Groupon’s employees have been involved in several scandals during the company’s existence. Inappropriate emails have leaked, executives have walked out of the company and investments have been proven false. The inside of a company must be cohesive in order for the company to work together as a strong team in the competitive marketplace. Poor publicity such as this can truly damage your brand.

Groupon will likely turn public in the first week of November, making this debacle especially newsworthy. And though Groupon was one of the Internet’s best new companies, it has lost value by ignoring simple elements of a great company. It fails to uphold strong customer service, maintain relations with clients, create a cohesive teamwork environment for employees and stay ahead of the competition.

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