LivingSocial versus Groupon
Groupon is a website where you can find all kind of deals and product discounts. You can filter these deals by city, category and/or price. LivingSocial is the biggest competitor to Groupon, and at face value the companies do the very same thing – offering customers coupon deals of the day using online methods.
Comparing both websites, Groupon offers the highest discounts. Their average discounts are up to 65% of the original product price (groupon.com). The average discount LivingSocial is offering is 54% of the original product price (LivingSocial.com). LivingSocial offers, compared to Groupon, fewer deals and they are much more selective. Many users prefer LivingSocial because they think that LivingSocial does provide a higher product quality. So Groupon offers the lowest prices, where LivingSocial offers the highest quality.
Last week, LivingSocial announced, that it will be changing its direction. In the first half of 2013, they had revenue of almost $ 264 million dollar. Despite this high revenue, they still had a loss of 81 million. Instead of offering customers daily coupon deals via e-mail, they are now focusing on becoming a marketing partner of a variety of companies. Recently, they launched all kinds of marketing tools, which improve the way in companies are able to control and analyze their campaigns. With this new business they are trying to reduce their losses. Although LivingSocial is changing directions, one thing is not going to change. Consumers will still receive emails from LivingSocial, but at a lower frequency.
One thing that is going to change is that the company aims to take the daily out of its deals by offering a larger selection that’s available at all time. The shift from daily deals to deals that are available at all time, alter the way LivingSocial interacts with its two stakeholders: buyers and sellers. LivingSocial hopes this will improve the quality of their product. They also hope to improve the relationships with their sellers by offering a larger time window.
A big critique on Groupon is that they exploit their sellers. These sellers have to give an average discount of 65% in the first place. On top of that they have to pay on third of their gained revenue to Groupon. As mentioned above, the average discount of LivingSocial is only 54%. Besides that, LivingSocial is now offering the sellers the opportunity to control and analyze their campaigns. Compared to Groupon, LivingSocial is acting more like a business partner.
Under the new strategy, merchants, meanwhile, will be able to advertise through LivingSocial on an ongoing base rather than be stuck with one-time promotions. That gives businesses the option to attract new patterns slowly over time rather than responding to a glut of them all at once.
Executives expect the change could create new revenue streams for LivingSocial from merchants that were unwilling to participate in the older model, or got tired of the Groupon model and are looking for a business partner relationship instead of a relationship that is based on high percentage exploits.
References
http://bandb.about.com/od/runningarticles/a/Groupon-Vs-Living-Social.htm
http://www.groupon.com/pages/goods-faq
http://www.ibtimes.com/LivingSocial-vs-groupon-which-one-use-294825
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Nice comparison. I will not badmouth my former employer, but I do have a critical opinion on the business model of Groupon in general. I don’t think that LivingSocial stands more chance than Groupon to turn their ship around. Both companies are fighting a loosing battle. Why ? Well, for once, companies have recognised that by making consumers aware of high margins for the commodity products that are available on those platform -> they condition consumers to look for these low prices. Goh & Bockstedt (2012) already state that once a user becomes used to pay once price, it is difficult to get him off it. For me that’s the reason why the business model will fail eventually. Partner will not have any benefit of those couponing campaigns in the long-term as they erode their own customer base instead of getting new ones. By the way, I think the same holds true for many other business models – such as Uber (lowering Limosine prices) or traveldeals.