These are email marketing costs, referral bonuses, advertisements, etc. The marketing costs include costs to acquire such customers.
Marketing Costs (Cost of acquisition of customers)Įveryone would agree that the ultimate source of income for Groupon is the customers referred to the merchants. Every new market is tapped separately by the company. This is also one of the business aspects where economies of scale don’t work. This is one of the most expensive tasks for Groupon as the company signs a different contract with different merchants. Sources Of Expenses For Groupon Cost Of Acquisition (Merchants) These tools include product promotion, advertisements, deal of the day listings, etc. The revenue sharing percentage depends on the negotiations and the marketing tools utilized by the merchant. That is – if out of 100 deals sold by Groupon, only 70 were redeemed: This means for every deal sold on Groupon, XYZ earns $25 dollars and Groupon earns $25.īut Groupon only shares the revenue of the deals redeemed at the merchant’s store and not the total amount of deals sold. Suppose a merchant ‘XYZ’ runs a campaign on Groupon to offer his $100 service at 50% off and signs a 50-50% revenue sharing contract with the company. The platform acts as a middleman between potential customers and the merchants and charge commission on every customer referred to the business.īut this commission revenue model isn’t as simple as it seems. Groupon makes most of its revenue by marketing and promoting businesses on its website. Groupon has a well-designed revenue model where it earns money from merchants in the form of commissions by providing them customer and marketing tools.
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