Who wants to pay full-price for anything? Not I.
So I lit up when social buying sites like Groupon and Living Social
started cropping up. They round up deep discount offers from all kinds
of businesses and present them to millions of potential customers.
That millions is misleading. Groupon,
for instance, has about 60 million consumers signed up but thats
nationally. The offers (and the businesses that make them through the
social buying sites) are mostly local: restaurants, spas, etc. I
received three offers: 50% off Asian Fare at Soo Woo, 60% off at Womens
Film & Art Festival and 70% off Botox (Ouch!).
Ill give you my e-mail, but not much more!
Consumers start by logging onto a social buying site which, somehow,
knows roughly where you are. In my case, thats Miami. Youre asked to
confirm that, then they ask for your email address and age. No big deal.
Then up pops up another screen that asks for more information: name,
address, etc. This is a little off-putting for some of the people Ive
I found the geography a little odd at times. Todays deal of the day
at Groupon is for a business clear across town. If youve ever driven in
Miami, you know that it might as well be in another country.
Dont Jump on the bandwagon, yet!
Nonetheless, small businesses seem to find social buying sites to be dream marketing tools. They pay no initial set-up fees and commissions are negotiable.
Groupon handles all of your purchases through their website and theyre very involved in making sure their clients are successful. If youre not successful then theyre not successful.
Of course there are potential downfalls. If you run, say, a mom and
pop ice-cream shop that regularly serves 40 or 50 people a day, what
would you do if 500 people showed up?
How can i lose? Profits are slimmer?
And, in a recent survey, 32% of business owners lost money running these types of promotions.
Open bar well lose our shirts!
Im not sure how the survey was conducted and Im never sure how companies calculate loss.
One of my favorite examples of this problem comes from a friend who ran
a bar in a ski area up north. Business was fine in winter when people
were skiing but a little slow in the summer and shoulder seasons. So my
friend suggested to his partner that they send a letter to all the
adults for miles around inviting them to a party with a free open bar
from 7 to 9 on a Friday night. Are you nuts? Well lose a fortune,
screamed the partner. My friend ran the math and finally convinced his
partner. And they did lose money from 7 to 9. But in the next six hours
they had their best night ever! And for the rest of that off-season,
they had one profitable night after another. The math worked.
Will I ever make my full price again?
I think thats the same kind of math that makes the deep discounts on social buying sites a good idea. In a way, it sounds like the Marketing Allowable from Direct Marketing 101, but you have to run your own numbers before you get involved. And you have to consider things like:
– Will discounting your product or service damage the
integrity of your prices? Will people just wait for your next coupon and
not bother to pay full price?
– What is the potential Lifetime Value (LTV) of customers who come in for special offers?
– Are they opportunity seekers and not repeat customers?
You also have to think about your current customers. Will a loyal
customer paying the regular price get irritated when newcomers pay half
that? Maybe and maybe alienating your current customer base isnt worth
It can also become an issue when businesses dont treat social site buyers as well as they treat their regulars.
Maybe Ill go to your cafe this week.
Just the other day, I bought a Groupon for a local restaurant. When I
showed the hostess my Groupon, she (and the rest of the staff) made my
guest and me feel out of place in every way imaginable. Im not going
For some businesses like salons, spas, restaurants and
recreational activities, social buying can be great idea. But what about
other businesses like lawyers, accountants, advertising agencies,
realtors and other services?
What do you think of this social buying phenomenon? Id love to hear from you. Please comment below.