How is Groupon Wooing Merchants?

Groupon (NASDAQ:GRPN) launched its Groupon Rewards loyalty program to all U.S. businesses today in an attempt to counter claims that its deals are bad for business.

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Groupon Rewards is an automated alternative to the store punchcard. Groupon Rewards lets merchants offer rewards in the form of exclusive Groupons to repeat customers who spend above a certain amount using a credit card on file in their Groupon account. Previously, the program was being tested in select markets like Philadelphia.

Merchants are able to set their own spending requirements and rewards with the program. Groupon provides them with payment analytics to assess the probability of their campaigns. The daily deal provider tracks consumers’ spending at participating businesses and notifies them when they can redeem a free Groupon reward.

Groupon has been plagued with a slew of problems since its IPO late last year, including accounting mistakes, disappointing earnings, shareholder lawsuits, and a board shake-up. Groupon’s market capitalization has dropped from $17.8 billion on its first day of trading to $6.35 billion today.

The Groupon Rewards loyalty program could help turn around the company. Groupon CEO Andrew Mason announced to stockholders earlier this week that the company’s next initiative will be Rewards, which will make it the operating system for local commerce. Mason asserts that the program will prove successful, as roughly 30 percent of merchants eligible to participate have signed up for the Rewards program already. According to pilot results, Groupon Rewards customers are more loyal than other customers.

However, not everyone is as confident as Mason that the Rewards program will turn things around, and it’s too soon to see how the program will perform. One thing for certain is that Groupon is looking to inch into an incredibly crowded space, in which companies like Facebook, Foursquare, American Express (NYSE:AXP), and Google (NASDAQ:GOOG) already have their own offerings.

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