Group Buying: Should Small Businesses Jump In?
Published: 13/06/2010 by Barb Dybwad
A new “group buying” trend is emerging on the web, in which consumers effectively band together to get better deals or discounts when purchasing products and services. One of the flagship group buying web services, GroupOn, was recently valued at over $1 billion — providing a sense of just how big this sector could become.
Other services like LivingSocial have raised significant funding. A fleet of other competitors are cropping up as well, from Tippr to Lifebooker and a number of smaller localized deal sites. Although still technically in its early stages, group buying is poised to become one of the bigger trends to emerge in 2010.
Most group buying sites tend to offer localized deals and discounts in specific cities. Typical offers include percentage discounts at participating restaurants, coupons for savings off a minimum purchase at retail stores, two-for-one event ticket specials and other similar deals. Typically, each promotion only becomes valid if enough members sign up for it, encouraging viral sharing of individual deals. If the minimum sign-up is not met, the deal does not proceed and no one’s credit card is charged.
Should Small Businesses Pay Attention Yet?
What does the group buying trend mean for small businesses? Is it time to pay attention, or too early to get excited?
In some ways, the situation is similar to how small businesses might consider involvement with another emerging trend: location-based checkin services like Foursquare. Neither trend has quite reached the “need to participate” stage, but both can have advantages depending on the nature of your business and of your clientele.
For small businesses that cater to a tech-savvy, early adopter type of customer or audience, getting in early on an emerging trend can be a good move for your brand. Participation in online group buying could strengthen the perception of your business as a forward-thinking entity by showcasing your awareness of new trends and your initiative to dive in and experiment with them. If an integral part of your company’s culture includes embracing new tools, being agile, and encouraging innovation, getting involved in group buying could promote your mission both internally and externally.
A New Opportunity to Serve Your Customers
Another way to look at the group buying trend is less as something entirely new and more as a novel twist on the long existing practice of rewarding your best customers with special deals and promotions. Companies have been placing paper coupons in circulars, sending snail mail flyers, and offering discounts online for years. Now, businesses are adding the “group” component to the equation, bringing with it a dimension of new customer attraction.
If you can get some of your existing repeat customers interested in a group buying deal, they may actually help get the word out about the discount and your brand by evangelizing it to their friends. They have great incentive to do so, not only because they already like your business, but because the more people who sign up for the promotion, the better chance they themselves have of securing the deal. Ortiz Fitness, a Brooklyn-based exercise boot camp recently offered one month of classes (five, 45-minute classes each week) for only $47 through Tippr. To make the group sales discount more appealing owner Bryan Ortiz decided to include a 30-minute personal training session for free. It’s a package that would normally cost $242, and the deep discount brought in 83 new clients. “It was the best three days I’ve ever had in terms of business,” said Ortiz. “It brought in prospective customers with a low risk offer and it saved me from having to pay for additional marketing like Facebook ads.”
When done right, a good group buying deal can be a win-win viral promotion for your business that keeps existing customers happy and brings in new patrons.
Opportunity, But Not Obligation
It’s doubtful that group buying will fizzle out any time soon, so if your business simply lacks the bandwidth to get started with it now there will still be opportunities waiting in the future. On the other hand, if the trend matches your business’s purpose and interests, you could benefit significantly by getting involved earlier.
For now, the trend is still fairly nascent, and falls into the category of “opportunity, but not obligation.” There’s no rush for most small businesses to dive in, but if group buying is a good fit to move your brand forward now is a great time to get involved.