Salaah Swan
Is Group Buying A Beneficial Sales Model For Local Businesses? |
Dec201110

At some point we have all likely purchased a “deal” by way of an online group/flash sale website such as Groupon or Living Social at least once. The allure of purchasing a $300 weekend spa service for $50 can be quite tempting. Especially in these days and times of financial tightening, when every consumer dollar spent is planned and scrutinized. However, is the group buying model a safe and effective sales platform for the businesses that use this service to promote and sale their products and services? How exactly does the flash sale/group buying service benefit local merchants in the long run? And is there a benefit at all?

The current group buying structure is a great one in theory, but ultimately could use several adjustments in order to make it more effective as a promotional and sales platform for small and local businesses:

  • · Engage customers through social media platforms to promote long-term loyalty
  • · Utilize online and mobile technology to encourage retention
  • · Design programs to support long-term consumer patronage of the business
  • · Restructure payment options to better leverage (advertising) financial investment and risk

Get The Most Out Of Your Social Media Networks

This is where I am always astonished at how many businesses are simply not integrating social media engagement into their marketing efforts. It’s as if they are still stuck in 1999 partying with Prince. Small businesses especially should be taking advantage of every possible resource as a means of branding, engagement, and promotions. And with that being said, businesses that are not building and using their social media networks as viable and effective low-cost marketing platforms are missing out big time. For instance, presently the group sale structure does not actively encourage customer loyalty and repeat business. Customers have the option of purchasing a deal in a flash sale at a considerable discount, using that deal to the benefit of only the customer, with a possibility of moving on if he/she so chooses. There is no contingency plan set in place to induce these one-time customers to return over time, building brand loyalty, but there should be. Think about it, in order to get the most out of their flash sale promotions, merchants should explore offering customers additional discounts for each return visit. And what’s the best low-cost way to communicate, promote, and enforce this? Social media networks of course! What would be the point of investing tens of thousands of dollars to advertise via a group buying website, getting new warm bodies in your door, only to let them walk right back out when they are finished with their experience. Ideally that customer should now be linked in to your social media network and vice versa, privy to special deals and promotions that the general public has no access to, designed to keep him/her coming back again and again.

Use Technology To Actively Encourage Customer Retention

This one is a no brainer, all it takes is execution. At the merchant’s point of sale and/or an app on the customer’s smart phone, the customer could “check in” for each subsequent visit after the initial deal purchase, making the customer eligible for instant savings via additional discounts and special promotions. This not only further exposes the customer to the deal website periodically, but it also motivates the customer to become brand loyal to the merchant. Additionally, each checked-in friend referral by the customer would earn the customer points that would accumulate for use toward extra discounts and freebies.  Additional points and virtual coupons should be offered for birthdays, earmark point accumulation, earmarked visits (10th visit check-in), social media “Mayorships”, etc. There are so many creative and practical ways to exploit this as an opportunity that I could go on for hours.

Develop Creative Promotional Incentives to Build Loyalty

The development of creative promotional incentives is also key in building long-term relationships with your new customer base.  As the merchant’s relationship with the customer is built, maintained through social media engagement, and cultivated over time, the development of targeted promotional tactics geared toward the customer’s friends and family can then be launched to reach an extended network of new consumers. For example, 2 for 1 deals, Mother’s/Father’s Day deals (bring your mother/father), and Bring Your BFF Day deals can be constructed in order to encourage exposure to a new set of patrons. This social component of attracting new business while building long-term relationships should be exploited at every step of the group sale process: from the initial flash sale offering all they way through to each subsequent repeat visit. Continual exploitation of this social component of the marketing plan should ideally reinforce the experience of purchasing and participating as a group, creating a network of connections with the merchant.

Payment Options For Small Businesses Should Be More Feasible

Let’s be honest here, many local and small businesses don’t have $15,000 sitting around to invest in advertising this month. Or next month. Or any month for that matter. It’s just not that practical to invest that kind of money for a one-time blitz when many businesses are struggling to keep the doors open. How about this: let’s explore the idea of better protecting the merchants that pay for the services of group sales websites, simultaneously easing the financial strain of these small businesses during slow economic periods. Under the current payment options small and struggling local businesses suffer when they invest and sometimes lose tens of thousands of dollars in a group sale deal gone awry. Presently, the merchant pays the website upfront to host and promote the flash deal, primarily benefiting the group sale company with a significant risk to the merchant. However, the creation of a payment plan that allows for a more equal distribution of risk would be key, as this would benefit both the group sale company as well as the local business in two ways: the group sale service would become more attractive to local and small businesses, and businesses would be more willing to take the chance of investing in an opportunity that is arranged to benefit them as opposed to take money from them. The mutually beneficial payment arrangement should be organized so that the merchant pays in installments throughout the life of the promotion, at different stages in the promotion’s lifecycle. Additionally, as those customers who were initially introduced to the merchant through the promotion continue to “check in”, and their referred friends and family “check in”, the group sale company should continue to collect what I call “residual royalties” (yeah yeah I know this isn’t the music business, but if it can work for them then it can work for any business model).  If at any point the evaluation of the merchant’s promotional plan is considered not effective, the merchant should have the option to discontinue the promotion with the group sale company, only continuing to pay residual royalties on the referred customers that commence in patronage of the business. In my opinion, this kind of deal is a more fair pay structure that is just and favorable for both the group sale site and the business.

With these important adjustments, as well as moderation in the frequency of deal offerings, the chance exists for a better and more successful business relationship in the group sale and local business dynamic. With a new year approaching, hopefully group sale websites will take heed to the necessary changes that will be essential in prolonging their existence and their long-term success.

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