Groupon Gnome Aims to Become Self-Service Marketing Platform

Groupon’s release of Gnome, an iPad-based point-of-sale system, promises an easier way for merchants and customers to redeem Groupons. But there’s plenty more going on in the back end, the company says, including, perhaps someday, a self-service local-deal advertising platform.

Today, Gnome includes the ability for customers to redeem Groupons by giving the merchant their names or connecting via Bluetooth to a mobile device. On the merchant side, Gnome serves as both a point-of-sale (POS) system and a credit card processing service. It also provides customer relationship management (CRM) tools that let merchants more easily create customer databases from Groupon redemptions, along with better redemption tracking in its online reporting tools.

As Groupon builds out the platform’s CRM capabilities, it wants to include more advanced tools such as the capacity for self-service marketing campaigns that would let merchants, for example, send out real-time deals to people in the area who would be most likely to respond.

While the company already offers real-time deals for certain categories, such as hotels, merchants who want to target Groupons need to work with a sales rep to structure and tailor these deals.

“We have the technical capacity to do this; bringing it to local merchants is part of where we’re heading,” says Kartik Ramachandran, vice president and general manager of Merchant OS for Groupon. His 1.5-year-old team is responsible for building business back-end systems. It launched Breadcrumb and Breadcrumb Pro, POS and business management services tailored to restaurants.

While comparisons to payments system Square are inevitable, Ramachandran says that Groupon is a hybrid with more components than Square. “Gnome is more of a cross-vertical digital cash register meets Groupon platform with back-end richness and a marketing angle,” he says.

Though restaurants and other verticals that have highly specific POS requirements and often tie POS to other systems might want to run Gnome in tandem with other POS systems, Ramachandran says that for most merchants, Gnome can replace the cash register or POS entirely. In the future, merchants will be required to lease the Gnome system for $10 a month in order to run Groupon promotions.

“We found that more than half of local merchants don’t even have a POS system, and this is a very affordable cost. They are looking at stepping forward in a very affordable way,” he says.

In its early days, Groupon took a lot of flak, with merchants complaining that they were overwhelmed by bargain-seekers who didn’t become regular customers. Today, the company says the vast majority of merchants are repeat users.

Although Groupon’s stock price slid 20 percent following its second-quarter earnings report, its gross billings increased 29 percent globally to $1.82 billion in the first quarter of 2014, compared with $1.41 billion in the first quarter of 2013. Quarterly revenue increased 26 percent year-over-year, and there were more than 200,000 active deals globally, compared to 140,000 at the end of Q4 2013.

The company says most merchants are happy with the results of their Groupon promotions, with 75 percent running a recurring deal in the marketplace, and 93 percent agreeing that Groupon brought in new customers.

Merchant data is stored in a partitioned database in the cloud, and individual merchants can access a variety of reports and analytics through a Web-based dashboard. Merchants can see, for example, a zip code heat map for a particular promotion, or get a gender and age breakdown of purchasers. Groupon sales reps already have access to aggregated, anonymous data that can identify trends, which they can use to help merchants create their offerings.

The next step, Ramachandran says, is to make this Big Data more available to merchants. He says, “With Gnome, our goal is to start putting a lot of those direct-connect capabilities into merchant hands. There will be less friction and more empowerment for the merchant to work inside the Groupon system.”

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