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New marketing tool of 2011 3: Group buying sites
This post was last edited by Alex Cohen, on February 1, 2011 @ 10:33 am
2010 saw the prominent rise of group buying sites, most predominantly Groupon. If you haven’t heard of Groupon now you sure will in 2011.
What is Group buying?
The group buying phenomenon began in China where it is known as Tuangou (look it up on Wikipedia if you want to know more). The basic premise is people sign-up to receive a daily offer from local businesses. It’s one offer only and the offer does not kick in until a set number of people are on board. Once there are enough people signed up, be it paying for a voucher to get a half price pizza or a one off payment to get a cheap course of hair removal, the offer is on. The site then collects the money and forwards it to the local business. The business then just goes about honouring the deals or contacting the new customers direct.
Whilst Groupon is the market leader Living Social is getting bigger and Google is planning to enter this market with Google Offers in the near future. A host of clones in niche markets also exisit.
Why is group buying good for businesses?
How would you like 20, 50, 100 new customers in one day? How would you like this by not paying any money up front? This is the opportunity group buying sites like Groupon offers. If you’re in a business like pizza or dry cleaning, one that often offers discounts anyway, this is a great way to get even more exposure. If you’re in a business that just needs new customers, group buying might be a big hit. It’s not unusual for group buying offers to have hundreds of people buy in.
How much does group buying cost?
The typical group buying model involves offering a discount of 50% – 90% off your usual selling price. The money taken by the site is then split between you and the site with them getting between 30% – 50%. Yes, you may only end up with 25% of the RRP but remember that’s revenue, not cost and how much marketing budget would it have taken to achieve that?
What businesses are most suited to group buying?
Local B2C businesses will probably find group buying very beneficial, but that’s not to say B2B can’t benefit too. There are lots of different sites out there targeting different demographics.
Does it actually work?
In a word yes. With group buying you get to market your business to thousands of people in one day and potentially get a number of new customers in one day, even if someone doesn’t take up the offer they’ve still seen your name. It’s brand building with instant impact!
Dinnersmith, a small town American restaurant, decided to give Groupon a go last December. They offered a discounted meal at their newly sited restaurant and sold 600 meals on the day the deal went live.
This is just one example of how group buying works. In essence it’s a way of getting hundreds of new customers in a short space of time, who if treated well will become customers for life.
What next?
You’ve got new customers, they’ve tried your service or products – how do you turn them into long term customers? This is where your traditional marketing comes back in. Newsletters, emails, direct mail, interaction on social media will all help build your brand and make sure your new customers don’t forget who you are.
Xander Marketing can support businesses with all of this from setting up your group buying campaign to following up interested parties, just contact us.
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