Focus on long road back, comms leaders tell Groupon

PR leaders' advice to Groupon: forget short-term, high-risk stock market gain.

PR leaders' advice to Groupon: forget short-term, high-risk stock market gain. Instead, focus on building a winning business model and communicate the results to consumers, investors, and business partners.

Agency executives told PRWeek that Groupon, which has lost more than 80% of its share value since its November initial public offering, should give up any attempts to earn that back in a short period of time. Much more important to the long-term health of the company is establishing a sustainable business model, maintaining good relationships with merchants, and convincing consumers that the company will be around for the long haul.

“What they have to do is clearly communicate business moves – simple to understand, high-impact business moves – that will restore confidence in the business' future,” says Ephraim Cohen, EVP for technology and digital content at MWW Group.

“Groupon will survive if it has the right business model and merchants will keep working with them. If merchants do so, then consumers will keep buying.”

Indeed, Groupon global head of communications Paul Taaffe, the former chairman and CEO of Hill+Knowlton Strategies, who joined Groupon in February, says via email that the company is focusing on employees. It is not commenting on the stock price “since it is something a new company cannot really control.”

The company's investor relations strategy was in the public eye this week after The Wall Street Journal ran a page one, above-the-fold story reporting that some early Groupon investors such as Silicon Valley entrepreneur Marc Andressen, scaled back or pulled out their stakes in the company entirely. Like the shares of fellow Web-based companies Facebook and Zynga, Groupon is trading well below the rate at which it went public.

Industry experts warn that Groupon, which has worked with Brunswick Group since filing its IPO paperwork last year, should not try to make up its stock losses in a hurry.

“If I was giving them advice, I would say take the long view and focus as much as your efforts as possible on improving the business and positive communications with consumers,” says Todd Defren, CEO of Shift Communications.

He adds that other Web-based companies have overcome stagnant financial periods in the past, such as Amazon.com.

“You can look at the Amazon model as the best go-to example for what Groupon needs to emulate,” he says. “There was a long drought for the Amazon stock price, and the firm focused on business and consumers and it ended up being very successful from a business standpoint.”

Specifically, while Groupon works to shore up its merchant-focused business model, it should also use small businesses that have successfully used its platform as part of its communications strategy, industry experts say. The featured merchants would also counteract negative stories about small businesses that have lost money after Groupon deals gone awry. The company hired Kal Raman as its new operations leader on Wednesday to reportedly lead an overhaul of its sales and payment processes.

“[Groupon] should pull forward the voice of merchants who have been successful as a voice to displace all the criticism about whether or not the programs are good for merchants,” says Chad Latz, president of Cohn & Wolfe's global digital practice. “Also, Groupon should focus on bringing a strong and credible voice to the other programs. It can't continue to be seen as a one-trick portfolio.”

Defren adds that the company should create a unit that consults with businesses interested in partnerships.

“I would create a consulting practice that prepares any dealer who signs up to understand the ramifications, someone to advise the company on whether it can really make money,” he says.

Taaffe points out that Groupon turned a profit and had a record number of customers and merchants in its most recent quarter. Defren says Groupon's revenue is “nothing to sneeze at,” noting, “a lot of problems that a company that Groupon has are good problems to have.”

Groupon suffered after the press pointed out problems with its business model, something that has also happened to other newly public tech-sector giants. To repair that, the Chicago-based company needs to make consumers and merchants easily understand how it makes money, says Cohen.

“Groupon and other companies have had problematic IPOs when there was not a clear, easy-to-understand story about its business growth,” he says, citing Facebook as an example. “When Google went public, we understood what the business strategy was. Did we believe we would use it more? The answer was yes.”

The company should also position founder and CEO Andrew Mason as a visionary, but not necessarily as the person running the business on a day-to-day basis, say agency executives. Mason, and Groupon at large, was widely criticized for the shortcomings in its business model and its restatements of earlier earnings reports after accounting errors.

“With Mason, one thing Groupon can do is hold him out front for the things he's most credible with, such as innovation, and leave the business operations and practices to the people who can talk more credibly about them,” says Latz. “They have to show that the business is viable and that they have the right leadership in place to sustain growth.”

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