Hands up. Who receives a Groupon email in their inbox every morning?
I do! There’s nothing like a good deal, especially one you can share (and boast about) with friends. According to Ecosultancy, Groupon gains 500,000 subscribers a week – that’s a lot of bargain hunters.
Groupon only established itself a couple of years ago and picked the perfect time to start the group buying phenomenon – the recession. People are more insecure with their finances and are more likely to be scouring the internet for the odd voucher or bit of discount.
I remember being introduced to Groupon by a colleague who was constantly forwarding me restaurant deals he thought I’d like. I was instantly hooked. This is how group buying works: a limited offer is displayed to the public for one day, and you have to snap up the bargain (which you probably don’t need) before the offer ends. It creates a sense of urgency, “Quick, grab this deal before it runs out!” Urban Dictionary has even coined its own phrase for this, “Groupon anxiety” – the “feeling of anxiousness and not being able to sleep knowing that a new Groupon will be released after 1am.”
Users feel smart and savvy when they find a discounted deal. It feels great when you find a bargain or get money off services, I’m sure you’ll all agree. Retail Doc describes this as ‘the need to feel smart’:
In a depersonalized world where many are anxious about their jobs, their finances and their relationships, shoppers who use coupons are, by extension made to feel smart. “See how much money I saved,” is a way to say “I’m no fool.”
Groupon, LivingSocial and other group buying sites are booming. However, cracks are starting to appear. Groupon encourages potential clients to use their site as a tool to gain valuable and loyal customers. But is this always the case?
A lot of businesses don’t actually make money from a Groupon deal, and some businesses have had very bad experiences with group buying. A respondent in a Groupon study conducted by Rice University tells us how for his business, that already has a strong clientele, group buying “brought down their overall profit margins” and prevented them from having “space for full-fared customers.” The respondent did acknowledge Groupon being useful for new companies that need a lot of customers but not for businesses that already have good numbers. This is because loyal customers can often be pushed out by deal seekers who probably are not going to return.
Most users who are signed up to Groupon are there to save money, not to become loyal to your brand. If a customer finds a tempting spa deal for £30 and then spots the same deal with another company for £20, they will usually choose the cheapest option. If a better deal comes along, they’re going to take it – after all, saving money is the reason they signed up in the first place. They are Groupon’s customers, not yours.
Businesses need to know and understand group buying sites before they decide to make an investment in them. How can you make a deal-seeker return?
The Rice University study shows of the businesses that did not fare well with Groupon (34%), “only about 25% of redeemers purchased products or services beyond Groupon’s value and less than 15% came back a second time to purchase products at full price.”
The key to success with group buying sites is to understand the pros and cons, and find ways to entice repeat visits. If your company and staff are prepared for hordes of customers, and treat them properly, repeat visits are much more likely. The Rice University study confirms this by showing “satisfied employees” is the most important factor in ensuring a successful Groupon campaign.
In the study mentioned above, 66% of companies that used Groupon were successful and did make profit, which shows group buying sites are useful marketing tools for businesses, as long as they are used to a business’ advantage!
Group buying facts:
- 62% of Groupon users are female, as are 67% of Living Social users (source: Women on the web study)
- In a Rice University study, two thirds (66%) of its respondents made profit using Groupon. However, a third (34%) reported no profit (source).