Groupon Pivots Amid Management Upheaval, Lagging Stock Price

While the Company Has Maintained a Strong Image With Customers, It's Done So Amid a Run of Negative Press

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Strategy shift: The online deals site hopes to diversify its revenue streams by promoting Groupon Goods.
Strategy shift: The online deals site hopes to diversify its revenue streams by promoting Groupon Goods.

Beleaguered yet carefree site hopes to move from an email-based daily deals platform to a searchable deals database ideal for desktop, mobile browsing

Every job has its upsides and downsides, but Groupon CMO Rich Williams has dealt with some serious extremes overseeing the online-deals site's brand.

While the company has maintained a strong image with customers, it's done so amid a run of negative press, which included a disastrous Super Bowl ad in 2011, floundering financial performance, the ouster of its founder-CEO Andrew Mason and the rocky relationship with its most important business partners, the small businesses offering its deals.

Since shares closed up 31% the day of its highly publicized IPO in November 2011, little has gone right for what Forbes once called "the fastest-growing company ever." Groupon stock has fallen from its initial $20 offering to about $7 a share in the middle of last week. Mr. Mason was fired in February, and Groupon has yet to hire a successor.

With that, Mr. Williams, who joined just after the Super Bowl gaffe and before the IPO in the summer of 2011, has been tasked with maintaining leaderless Groupon's carefree image while proving that the company cares about pleasing shareholders -- something critics say Mr. Mason was not particularly adept at.

Playfulness is embedded into the company's culture, according to Mr. Williams. Directly outside his office is a jungle-gym workspace with fake fallen trees and cubby holes. Groupon also keeps a team of comedy writers on staff to ensure no one encounters dull copy when considering a deal for a Turkish bath house or an Italian meal.

But there's serious business at hand for Mr. Williams and his team, including the company's pivot from email-based daily deals platform to searchable deals database ideal for desktop and mobile browsing. He's also trying to help diversify the company's revenue streams by pushing Groupon Goods, the company's lower-margin product business.

Rich Williams, Groupon CMO
Rich Williams, Groupon CMO

Mr. Williams insists those challenges are really a great opportunity.

"That, for me as a marketer, is an exciting playground to be in," he said during an interview at the company's Chicago headquarters. "One where you've had some challenges and you could come in and try to make [the brand] a phenom."

Mr. Williams does have one big thing going for him: loyal customers. The percentage of Groupon customers likely to buy another Groupon three to six months after their initial purchase increased from 63% in February to 66% in April, according to surveys conducted by investment bank Piper Jaffray.

"[Groupon's] brand perception with consumers is great," Forrester analyst Sucharita Mulpuru-Kodali said. "Its biggest blessing is that consumers like them and find them very customer-friendly, but it's always been at the expense of merchants."

Groupon's shift in strategy is partially aimed at repairing those relationships. Mr. Williams said he wants Groupon's image to change from "this thing you get in your inbox each morning that maybe shocks and awes you into buying" to a searchable deals database users visit whenever they're feeling adventurous. He hopes this will renew merchant interest in working with Groupon.

"On the merchant side, it's migrating from this big push and big feature to something that's more about being a business partner and growth," he said.

Likewise, the company is touting its mobile audience to small-business owners. More than 45% of all North American Groupon transactions were conducted via mobile devices last quarter, up from 30% a year earlier, making the company well-positioned for e-commerce's continued transition to m-commerce.

The reason for that shift may be that the foundation of Groupon's initial success -- using deals to entice consumers into purchases they normally wouldn't consider -- is even better suited for mobile than for desktops. Mobile purchases tend to be more discretionary, spur-of-the-moment decisions made without much research. According to Groupon, less than 45% of transactions resulted from email.

Still, Gartner analyst Gene Alvarez is skeptical consumers will use Groupon as a searchable deals database. "The customers are going to continue to want deals pushed to them," he said.

Mr. Williams is familiar with managing a company's brand while it attempts to fundamentally change its business model. He helped Amazon market the Kindle Fire and oversaw its return to TV advertising.

Mr. Williams also helped market Amazon's Endless.com, the footwear brand that's since been folded into Amazon Fashion. At the same time, Amazon was experimenting with different e-commerce models, including Amazon Local, its Groupon competitor.

While Mr. Williams's assignment at Groupon is similar to the one he had at Amazon, it's more difficult to expand from local deals to physical goods. Groupon's target margin for deals is between 25% and 30%. The target margin for Groupon Goods, however, is in the high single digits, according to Groupon spokesman Nicholas Halliwell.

And unlike at Amazon, Mr. Williams will not be buying any TV time to help Groupon diversify its revenue streams. When he left Amazon for Groupon in June 2011, Groupon was still reeling from a disastrous set of Super Bowl commercials.

Consumers complained that the series of spots, addressing the Brazilian rain forest and the plight of whales and Tibet, were in poor taste, making light of serious issues. There are no plans for new commercials. Rather, Mr. Williams's strategy is to convert Groupon's loyal base of subscribers to daily website visitors with more precise digital targeting.

"There's a huge amount of existing demand that we just haven't tapped into historically," Mr. Williams said about targeting customers based on interest and location. "And in that sea of choices, deals can be a differentiator."

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