One minute, there wasn’t a single Group Buying website around, and now it seems like every second website is offering group buying deals – from Groupon in US, to Jump on it/ Living Social and Spreets in Australia.
But does all this popularity really give great deals to customers, as well as businesses?
The Group Buying Concept
The concept is relatively simple. There’s a website portal offering amazing deals. There’s a business selling their soul and working for free. There’s a customer getting a bargain.
It used to be based on the premise that a lot of people were buying and therefore the business could offer a service/ product very cheap. But now with the swarm of group buying sites, possibly reaching 100 soon, and with the number of buyers required to “close” a deal being less and less (I saw today on Grab One that only 2 customers were needed for the deal to go ahead), what is the real benefit for the business?
Here is the Original Concept via Spreets:
httpv://www.youtube.com/watch?v=3XJto29XN-4
My Experience
Obviously with so many good looking deals around, I thought to take advantage of some, and to weigh the pros and cons of the shopping experience.
I’ve bought a fews deals including a car service, a massage, and prepared “homecooked” easy meals. From purchasing the deals, the main pro is that you receive a highly priced or highly valuable item for a low price.
So with so many good deals, why is it that I am hesitant to buy any more?
Bad Service
At the time of the voucher promotion, all the businesses are literally swamped with new customers, and every single time “customer service” suffers. If you purchase a voucher for something you want, it can be frustrating for the buyer to wait weeks or months to use it.
I had to go on a 2 month waiting list for my 1 hour massage – ouch!
And the homecooked “easy” meals… well… It’s been weeks, I’ve rung them twice, and no contact from them at all!
The “Oh-You-Are-Using-A-Voucher” Attitude
I couldn’t think of a more descriptive title for this one, and maybe it’s just me, but I started having this experience 10 years ago when I bought a booklet of vouchers to be used at various businesses around the city.
Basically, the business looks happy to see you, and then you mention you would like to use your voucher, and suddenly they wish you weren’t there, and seating you/ serving you/ etc… makes them slightly “miffed”.
Sometimes it’s obvious, and sometimes it’s very, very subtle, but it always seems to be there. Instead they should be excited and happy to welcome a new customer to their business.
Despite this happening 10 years ago, I’m still getting that impression from businesses today.
It seems I am not alone, and I hope you enjoy this little story from Twillyon:
A good friend of mine bought a dog grooming group deal for a reputable dog salon she had not tried before. She had heard good things about the dog salon and was pleased to be able to try it out for more than 50% off their RRP. When she called to book her dog in, the first question the merchant asked was “do you have a discount voucher”, she told them about the voucher she held and the merchant’s response was “we’re booked out until May”. When she told me I decided to conduct a little experiment of my own and called the same salon asking for the same service but this time when asked if I had a discount voucher, I replied “no” and was able to book my hypothetical dog in 3 days later. Can you really blame the merchant?
BUT, I guess, at the end of the day, the buyer is getting the service/ product for a fraction of the cost, so they shouldn’t really complain, right?
From a Business Perspective
I’ve chatted to some businesses who have signed on to offer these promotions, but even they struggle to see the long term benefit.
1. You’re Working for Free
So, you agree to do a voucher promotion to boost your business (ie extra marketing 
), get more customers and get some cash coming in. After chatting with a coupon site, you will probably be advised to offer a great deal, with a 50% to 75% discount.
After the “promoter” takes their 30% commission, or sometimes even the WHOLE amount of the voucher (I was told Scoupon does this), you really are working for free.
The concept is that the customer (bargain hunter) will be soooooooo thrilled with your product/ service, that you can quickly and easily convert them into a repeat-business, full-price-paying client….. in theory.
2. Cost Per Client
When you think about your business marketing with a R.O.I. (return on investment) viewpoint, you will understand that it is impossible (yes, actually, really impossible) to get clients for FREE.
Ok, phew, now that you realise this, you need to work out your cost-per-client. And this can make you think about this kind of promotion in a very different light:
- How much money and time do you have to spend to get a customer/ sale?
- How much money and time do you have to spend to get that customer to return and buy again?
When you know these answers you can determine whether a voucher promotion fits in with your overall strategy.
3. Target Market
From the most basic fundamentals of Marketing 101, is the type of client that is attracted by this promotion, really your ideal/ target client?
Or will you only see them once, to use their voucher, ne’er to return until the next 75% off promotion?
You may know your specific customer’s demographics, but it is almost impossible to target your exact customers using coupon-promo websites. Especially the kind of customers you would like to build a long-term, repeat business, ongoing relationship with.
4. Can You Handle It?
As a business owner, you need to understand that having a promotion for the sake of having a promotion, is never a good idea.
A promotion should be carefully planned, and tracked, and followed up on, to ensure getting the most out of it.
What’s the point if you get 100 new customers, that you have to serve for free, if it will take you months and months to service these customers. And how will you build a relationship with these customers, and keep them coming back?
It may do your business name and brand more harm than good if you cannot handle it.
In Summary
In exchange for a little money, and a whole bunch of new customers, the risks far outweigh the rewards for businesses considering running a coupon promotion.
But, as always, I would love to hear feedback and thoughts on this matter… From both the customer viewpoint and the business viewpoint.
Have you got a good story to tell? As a customer did you have a great coupon experience and continue visiting that business?
Or business owners, have you seen REAL, long term benefits from a coupon promotion? Please share below.
Twitter: ExtremeJohn
June 7, 2011 at 2:53 am | Permalink
Excellent write-up as always Fiona. Group buying leaves a lot to be desired for multiple reasons as far as I’m concerned. Of course my experience comes from a business owners perspective, as I’ve never purchased a group buying deal myself.
I know that our LivingSocial group buying experience was, eh.. You can read about it here if you want (or delete my link if you don’t want it in here) http://www.extremejohn.com/results-of-my-marketing-campaign-with-living-social/
My other experience involves Groupon, but Groupon was nice enough to tell me that my chain of six indoor tanning salons wasn’t “big enough” to permit in to Groupon, even with over 1 million customers, 7+ years of service and the fact that our salon chain is the largest in the area. Yet they can go ahead and bring on single location massage and spa venues. So, my opinion of Groupon is hardly a great one.
I’m working on building our own group buying functions in to our online catalogs, will help me cut out the middle man and recoup more revenue.
Extreme John´s last [type] ..About The My Top Commentators Plug-in For WordPress
Twitter: abnormalmarket
June 21, 2011 at 2:38 pm | Permalink
Thank you so much John for sharing your experience here, and your article. You are a true entrepreneur and it’s great to get your feedback on all the new initiatives that you try.
I think Group deals probably won’t last. I really cannot see a long term advantage. There are so many other ways businesses can generate new business, and keep more of the revenue, if only they look around.
Great article Fiona,
I had been thinking all the same things over the past week. I have purchased a couple of things but the service would need to be outstanding to win over my business permanently. My perspective as a Business Coach is that it devalues your product/business. You attract a client who may not ever be willing to pay full price, therefore there is no long term value in the relationship. If these businesses wanted to really take advantage they would need to view the sale as an opportunity to show amazing service, which most are not. They are instead, as you have pointed out, viewing it as a burden and giving the client less than stellar service. They may as well burn money sadly!
Twitter: abnormalmarket
June 21, 2011 at 3:08 pm | Permalink
Thanks Melanie,
It’s great to hear your feedback on your own personal experience as a buyer. And also your professional opinion as a small business owner. Yes, I think it puts too much emphasis on a “price-based-service”, and the buyers may always expect A LOT for a little.
And it is true, businesses are not welcoming these types of clients like they should.
It will be interesting to see as Group Buying develops, just how it could comfortably settle in the marketing mix
I have purchased several restaurant and personal service coupons including yard work, oil changes, haircuts, facials etc. In all cases the businesses rely on return customers. I am a potential long term client. The coupon informs me of services at locations I didn’t know about. With the exception of the restaurant coupons I have found that all of the personal service businesses dislike the customer with the coupon. They generally try not to give the service for extended periods of time or reduce the service saying, “our coupon service is X”. In one case I receive 5minutes of treatment that should normally be closer to a half hour.
I come from a business background. While these coupons may look like a good deal to the customer… and sometimes they are…They seem to be a bad marketing strategy as it involves a busines attracting then dissing a customer.
Perhaps businesses need to be a bit more strategic in their offering of said coupons. This may allow the business to increase business via happy return customers. This is called a win win.
In the heat of the moment, I went with SPREETS, thinking a christmas eve offer would bring in clients over the holiday period amongst my repeat clients and help kick start the new year. As your excellent article points out – I worked for next to nothing. I differ from the businesses in your article in that I treated all SPREETs customers with vouchers with the same respect and energy as all my clients. For me that was the point. To provide the same level of outstanding service and support for my coaching and massage clients. And hopefully gain new clients or at least referrals from satisfied customers. The reality is that many clients loved the service and wanted to come again but were not my target market in that they could not afford the return at anything near my normal prices – or even discounted ones.
In terms of SPREETS I found the process was all very inviting up front and then disappointing after the deal was done. The deal was 60% of the deal price up fron and 20% on presentation of redeemed vouchers – based on how many vouchers were returned. With 20% commision to SPREETS.
At present I am undergoing a wrangle with SPREETs to find out what the situation is as my final 20% payment is far lower than I expected – with 85% of my customers redeeming their vouchers I only received about 25% payment. Go figure – it must have been in the small print somewhere.
So all in all for businesses that offer a service requiring time – rather than products food etc its definitely not worth it. I certainly got a lot out of it in terms of clients I wouldnt normally meet. So nothing is wasted.
Overall I think the companies out there are rather unscrupulous and greedy. It could be far more of a win win for one and all if they went in with better values and were more honest.
Thanks for the article – I will definitely circulate to others.
Best
Joan
Joan COrnish´s last [type] ..Waking up to Wellbeing
Group buying websites is becoming a saturated industry. There are too many to go around and competition is fierce. Even if deals are really great to have it can be both a gift and a curse at the same time. For one, sometimes temptations happen. We purchase something we inherently don’t need. Or at times, we purchase a discount not properly set up to meet our standards. I guess it can take a bit of good luck to get a really good deal.