Can high-end Groupon deals lure repeat customers?

Faith Merino · October 28, 2011 · Short URL:

Groupon launches Groupon Reserve, which could solve the problem of too many cheapskate deal-seekers

Groupon is shaking things up just in time for its IPO road show.  The group buying pioneer has just embarked on its first foray into high-end deals with the launch of Groupon Reserve on Thursday.  New York subscribers were invited to join with the offer of $70 for a three-course Italian meal for two at Bice in Manhattan.

In an email to select Groupon subscribers in New York, CEO Andrew Mason explained the new service:

"To thank you for your loyalty, we'd like to invite you to be among the first members to receive our select premium service, Groupon Reserve.  As a member of Reserve, you will occasionally receive exclusive offers for premium experiences, like today's offer to Bice."

Interestingly, the new site departs from Groupon’s characteristic design—green background, goofy illustrations—and swaps it out for a cleaner, more minimal design with a plain, uncluttered black background that is actually somewhat reminiscent of Gilt’s design, minus the gold lettering.  Because fancy people don’t like silly illustrations or snark. 

Speaking of, that’s another thing missing from Groupon Reserve—the snarky, silly wit with which Groupon deals are usually written has been abandoned in favor of…sincerity. 

Groupon was not immediately available for comment, but it seems logical to assume that the strategy here is to increase revenue (and thus profit—which Groupon has been criticized in its failure to produce in the past) by appealing to new subscribers who aren’t just looking for the rock-bottom cheapest deal they can get, but actually have a little extra cash to throw around. 

This could also solve another problem that has plagued Groupon from the beginning: a lack of repeat customers.  Groupon has long been criticized for appealing to deal-seekers who use a Groupon once and then never return to that merchant again—a particularly pernicious problem for restaurants.  But Groupon Reserve may address that problem by offering higher quality deals to higher quality subscribers.

That should please potential investors as Groupon gears up for its IPO, which is scheduled for November 4.  Groupon has had to face down questions about how it’s going to increase repeat customers.  In the third quarter, Groupon had 143 million subscribers, but only 30 million of them bought Groupons, which speaks to a failure to drive repeat sales.

To solve that problem, CEO Andrew Mason told potential investors in Boston on Wednesday that Groupon plans to swap out its worst 10% of employees with a fresh batch, which, he says, will help improve the quality of Groupon’s service. 

Groupon will begin trading on NASDAQ under the ticker symbol GRPN on November 4. 

It will be interesting to see how Groupon fares in the luxury deal space--one in which Gilt Groupe has already established itself as the dominant player with sites like Gilt City, Gilt Taste, Jetsetter, and more. 

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