In my last post, the challenges of being late to market were discussed, with the demise of Microsoft’s Zune music player being the latest example of how failure to differentiate can doom a product. Now, another situation in which a well heeled brand is coming to market with a new product is examined; this time it is from the perspective of an entrenched competitor. Groupon is a social media success story, going from start-up to an estimated $3 billion in revenues in less than three years. In that time, Groupon has established itself as the dominant social couponing brand. Nothing will be able to derail Groupon given its position as the early-to-market king… right?
Should Groupon executives be losing sleep over Facebook’s push into the social couponing category? The social network giant is launching Facebook Deals, which resembles Groupon’s offering of discounts on local dining, services, and entertainment. Facebook Deals has been available in some foreign markets for several months, and it will debut in five U.S. cities soon (Atlanta, Austin, Dallas, San Diego, and San Francisco). With more than 500,000,000 users worldwide, Facebook is a ubiquitous distribution channel that holds appeal for businesses in markets large and small.
Facebook may be bigger than Groupon, but is it better? Market presence and success give a brand like Facebook an upper hand when introducing extensions but do not guarantee success. Other brands have struggled with breaking into new categories. For example, Google’s enormous market share in search and search engine advertising were not enough to make Google Buzz a viable product, nor has it exactly translated to success for its Chrome browser.
Facebook Deals may be a smash hit, but it will not be because Facebook has a large number of users. In order to be adopted, it will have to offer points of difference relative to Groupon. Are the deals more attractive? Are coupons easier to redeem? Is the interaction with retailers or service providers different in some way? Groupon can win the battle by being better; being first will be helpful but not as much as a providing a better experience for customers.
In the long run, being better will be more profitable than being first. To borrow an ad tag line from Nike, Groupon will have to show “My better is better than your better” when it comes to competing with Facebook or anyone else. If the customer experience is positive and enjoyable, almost any brand can compete.
