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Groupon Floundering: Is the data-driven machine customer-blind?


That’s what a share of Groupon stock was worth yesterday.

The daily deals site – once seen by many as the future of e-commerce and small business advertising – is hemorrhaging worth. A month ago, one more quarter of discouraging earnings were reported, and while Groupon is by no means dying (with revenue up roughly 30% to $625M), investors are not happy.

One of the reasons investors were drawn to initially investing in Groupon was because of the company’s reliance on big data, as detailed in a TechCruch article from early 2011, as a way to recommend offers, tweak campaigns, and market to a broad swath of consumers. This is before Groupon took a $9.8 million loss in Q4 of the same year. So, is big data enough?

A review of some of Groupon’s biggest missteps could reveal many more fundamental cracks in the alabaster. A third of Groupon’s small business customers surveyed by Rice University reported their experience with the program was unprofitable – with many losing thousands of dollars. A full 40% said they would not use Groupon again. What the San Francisco Chronicle calls “Groupon’s perception problem” might actually be a more critical and central issue for the company – it doesn’t appear to work for its customers.

Maybe Groupon is looking in the wrong place by relying on big data. True conversation and engagement may provide the lens that big data can’t. Conversation with small businesses – their core customers – and conversations with end consumers, who buy the coupons and who are increasingly turning away from the service as the daily deals industry begins to fade.

Qualitative assessment, instead of an over-reliance on quant numbers, could answer many of the questions Groupon seems to be struggling with. Why are these deals not working? Why are businesses complaining about significant pain points, and what are they? Why are consumers buying – or not buying?

Why indeed. Because with all the access that Groupon has to data, they might have forgotten the most important access of all – access to the minds of their two disparate customer bases.

Data can only take you so far into the mindset of those who rely on you, and those who seek you out. As Steven Colbert said satirically on “The Colbert Report” a few weeks ago, “it’s all about the demographics…young people love being target-marketed by their birthdate and purchasing power.” It doesn’t seem like a stretch – we may be looking at one of the causes of Groupon’s decline.

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