New marketing approach leads to Groupon profit

Groupon says a better return on investment from its marketing spend helped lead to its first quarterly profit.

Groupon

The daily deals company reported an operating profit of $39.6m (£22.9m) in the three months to 31 March, compared to a $117m (£72.7m) operating loss in the previous year. Revenue increased 74.6% to $559.3m (£347.4m) and net losses were cut by 96% to $3.59m (£2.2m).

Marketing costs decreased 49% year-on-year to $117m (£72.7m) and fell 25% quarter-on-quarter as the company switched its focus from acquisition to retention.

The company says that the approach helped grow the number of repeat purchasers 1.5 times faster than the number of unique purchasers. It ended the quarter with 36.9 million active customers, up 140% year-on-year.

Groupon recently vowed to change its marketing strategy following an investigation into the business by the Office of Fair Trading (OFT) that found the company had breached consumer protection regulations.

The matter was referred to the OFT by the Advertising Standards Authority in December after Groupon’s marketing had “repeatedly breached” the advertising code.

Groupon commissioned market research specialist Foresee to assess its merchant and customer satisfaction earlier this year.

It says its March 2012 US consumer satisfaction score of 83 places the company among the highest surveyed and within approximately two points of the 5-year best ever average satisfaction score for online retailers.

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