Find Customers Who Want Long-Term Value

Andrew Mason, 32, the charismatic, but controversial CEO of Groupon, has been fired. After a rocky leadership, profanity laced memos to the SEC, fuzzy accounting practices, SEC investigations, and a whopping 77 percent decline in the company’s share price, Mason now joins the ranks of the unemployed. The firing wasn’t a surprise. It came a day after Groupon delivered a net loss of $81 million for the previous quarter. Stock prices plummeted 24 percent, but Mason, whose personal worth is more than $200 million dollars, said he was okay with the loss and the firing. In a letter to employees he likened his time and journey at Groupon to a 1990’s era video game called “Battletoads,” explaining that failure is part of the package. “It would be like I made it all the way through the Terra Tubes (Battletoad) on the first try, without ever dying,” he explained. Mason cited the company’s controversial accounting techniques, its failure to meet its own financial projections, and its deep and dramatic stock decline for the firing, but didn’t point a finger at anyone but himself. “The events of the last year and a half speak for themselves,” Mason wrote. “As CEO, I am accountable.”

Groupon’s novel idea of offering steep discounts to consumers for local products and services sounded great at face value. Unlike other coupon techniques, a certain number of consumers had to buy in to the discount before the discount went into effect. Vendors liked it because it guaranteed them a certain number of customers and ultimately consumers got a great deal, Groupon took a piece of the action, and the local vendor got tons of exposure. There was only one problem. It wasn’t great. Financially the consumer won, Groupon won, but the vendor actually lost. Vendors did sell a lot, but often at a loss. The vendor thought that would be ok, since people now had a sampling of their products or services. They thought customers would come back and back; but it didn’t work that way. The critical flaw in Groupon is that it was structured to attract primarily one kind of consumer mindset—customers who wanted cheap prices, not long-term value. After using their deep discounts, customers didn’t come back, they just went to the next cheap deal.

The Groupon challenges teach us a great marketing lesson . . . for marketing efforts to thrive you need to have an offer that appeals to value, and where everyone wins, not just those shopping for a deal.

Read more on about Andrew Mason’s termination at the Time Business & Money section.


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