Group Buying - Silver Bullet Marketing for New Business Owners?

In the beginning, I was getting quite annoyed with daily emails on so-called discount coupons flooding my inbox. But then my colleagues and friends started ranting and raving on the discounts, and then news hit of Groupon turning down Google takeover and currently being valued at US$7.8 billion.

Some of the visible players in the Australian market are Spreets, Scoopons, Living Social, Cudo and GrabOne

So I decided to take a quick look, and I must admit the revenue model is quite robust - in a nutshell, you only pay marketers when you get conversions.  But eBay and Amazon also run under the same premise right? Yes and no.  With the 'group buying' revenue model, what stands out is the simplicity by which bricks n mortar businesses can acquire buyers at virtually no risk, i.e. you only pay if the 'deal is on' or minimum number of buyers transact.

The only risk to the advertiser, in my opinion, is the perceived value of a highly discounted product - "People will think my product / service is actually worth a lot less than it's discounted to because it's highly discounted!"(weird logic) or "Perceived value of my product against my competitors may hit an all time low" or "People may thing we are desperate".

But with the omnipresent GFC and rising costs of living , this is a quick and easy way for any businesses to:

1. Not only get customers through your door, but make them spend.
2. Target local audience, and make them spend.
3. No initial outlay, only pay if you make money.

Particularly for new businesses, hungry to get the initial clients through the door, I cannot think of any other low risk, high volume advertising solution - just make sure these buyers are treated with utmost care and attention.  Contrary to popular believe (and practice), I strongly feel customers that buy using discount vouchers can become the most loyal ones provided they are treated with exceptional service.  Just think about it - not only are you buying a luxury item for peanuts, but exceptional service is thrown in too  -  think 'network effect'!


Only for Lifestyle Products and Services?


So far I've only seen discounts on offer for hotels, restaurants, beauty treatments, winery tours and the like - businesses that cater to the lifestyle needs and wants.  Also, group discounts seem to circumnavigate around luxury items, which in my opinion works well with the aspirational target audience.  I would, however, like to see other industry applications of this revenue model, say, Trades, Building & Construction, Automobile, etc.  The question remains, though, for the marketers, how best to target audience during their research phase of their buying decision making process and whether medium to large corporations will be more prone to perceived value issues of their products being discounted.

Personally, I believe it should be used as an advertising module and not an end all to be all.  For example, a large tool company may use group buying provider as soon as they introduce a new product into the market.  Customers of this product should be treated as kings and queens, which would start a solid network effect and referrals would flow from this base.

All said and done...


I still have not made a purchase, sadly, but will probably get my first online group discount voucher today!  Will let you know how it goes....