Hot new marketing trends come and go all the time, and smart marketers know to be skeptical of those shiny new promotional tools that periodically come along. But while originally thought to be yet another one of those marketing fads, it looks as though group deal sites are not only holding their own, but actually growing significantly.
Take Groupon for example, which currently ranks as the number one daily-deal site. According to Boston.com , Groupon now has 85 million subscribers, up from 2 million just a year and a half ago. And other group deal sites are experiencing similar growth. LivingSocial, ranked second to Groupon, now boasts 28 million subscribers compared to its 120,000 last year. Although skeptics believed traffic to daily-deal sites would flatten with the recovering economy (meaning less bargain-hungry shoppers), we've witnessed the complete opposite. According to ComScore, LivingSocial is now one of the 10 fastest-growing websites, experiencing 7 million unique visitors in March -- an increase of 27 percent from February.
What Are Group Deal Sites?
Group deal sites are websites that thrive from the concept of collective buying, which is relatively easy to understand. In the simplest terms, the deal site offers subscribers a deal (usually segmented geographically), and if x number of people purchase the deal, they get it. If the required number of purchases is not met within a designated period of time, no one gets the deal, and no one gets charged.
Are Deal Sites Right for Your Business?
Group deal sites may have passed the point at which they're no longer a marketing "fad," but does that mean they're right for your business? When deciding whether to go the route of collective buying, there are definitely some important factors to consider.
5 Factors to Keep in Mind When Considering Group Deal Sites
It may not be right for your business.
Do your research. Is your target audience in line with the types of people who subscribe to deal sites? If your products or services don't appeal to those audiences, you might want to reconsider.
2. Although you don't pay them anything, group deal sites take a cut of the sales. Sure, there are no upfront costs to list your offer with group deal sites. That said, recognize that the trade-off is a portion of the sales, and it's exactly small. Groupon, for example, takes 30-50% of your profit.
3 . You have to offer your product/service at a significantly discounted rate. This is in addition to the cut of your profit the deal site takes. To put it in perspective, if you're a spa and the deal you're offering is 50% off a $100 massage, you have to consider that of the $50 you'd make, the deal site could take $25 of every purchase made, leaving you making $25 for a massage from which you'd normally make $100. Yes, you'll experience a surge in sales, but will the buy-in be worth it? Do the math first.
4. You have to be prepared for a surge in sales. Think about it. If you had a big burst in sales all at once, while great for business, would your team be able to handle any and all associated effects? If you got an influx of phone calls from customers, would your customer support team be overwhelmed? Would people be happy with your product? You need to make sure you have the resources in place to respond to a higher volume of sales, all at once. And if people are unsatisfied, you also have to realize you might run the risk of dealing with a large group of unhappy customers.
5. But you don't have to be tech-savvy. Many group deal sites take a lot of the technical work out of collective buying, making it very easy for small businesses to take advantage of such a digital, social marketing tactic.
Benefits of Group Deal Sites
While there are some definite catches you'll want to consider, there can also be some great benefits to participating in group deal sites.
Customer Tracking : Some group deal sites (e.g. Groupon) will provide you with a list of the customers who bought your business' deal, enabling you to keep track of those customers and possibly even re-market to them later.
Expanded Reach: Because deal sites are promoting your offer to their subscriber base, you have the advantage of reaching a much larger group of people you might not otherwise have had access to. In turn, this could help generate new customers who might previously have been unaware of your business, products, or services.
More Sales & Repeat Customers: Some businesses end up enticing their deal site buyers to spend more money than the face value of their coupons, which is one way businesses end up offsetting the small profits they make through group deal sites. In addition, another hope is that new customers the business acquires through collective buying will love its products and services and turn into repeat customers.
In a nutshell, small business marketers who are considering experimenting with an offer on group deal sites should understand that, rather than making sales and turning a profit, collective buying may be more of an opportunity to increase reach and generate some brand awareness among people who might not otherwise have bought from you.
Have you experimented with group deal sites? Will you in the future?
Photo Credit: Cameron Russell
Originally published May 24, 2011 3:30:00 PM, updated October 20 2016