People love discounts, especially during hard times when money is tight. This is the way how group buying works: The deal is posted on the collective buying website. Consumers now have a limited amount of time to purchase this deal before it expires. By the end of the deal’s time, “X” amount of people have purchased the deal, and then comes the split with the group buying platform that ran the deal. In the other words, the company using group buying must divide their prices into two parts: the first part is like the gross revenue they’re given when their goods are bought, and the second part is for the website or the organization that runs the group buying system as the fees of using their services. November 2008, groupon.com was the very first offering this kind of dealing goods. It is so famous these days that people use group on as a verb, like google. And now, there are hundreds of sites offering unbeatable deals. The company is rumored to have generated $760 million in revenue for 2010, up from $33 million in 2009. Google famously offered to buy the site for $6 billion but got rejected
PRO ( GOOD ASPECTS)
There are definitely pros to participating in a group buying deal, but many business owners are failing to look at the cons, and ending up with negative thoughts:
It attracts a lot of consumers. You can reach new customers by appealing to those who are looking for inexpensive deals and a chance to save money. You get to charge lower prices to new customers who aren't willing to pay more. Existing customers are willing to pay full price for products or services. Moreover,p eople are going to tell their friends about the experience. If a business gives 100s of people a good or bad customer experience, these same people will then tell their 100s of friends and very quickly you have created a viral word of mouth that could be good or bad depending.
It advertises your business. A Groupon promotion can be a way to announce the existence of your business to consumers who are unfamiliar with your products or services. You get to make potential customers to try your goods. If they like it so much that they will come back and buy from you again, you have an advantage. So, You must make your promotion grab consumers but at the same time increase the rate of repeat customers.
It helps move inventory. Use Groupon deals to sell slow moving items in your inventory. Discounts seem to be most compelling for merchants with low cost of goods sold. Use price deals to promote a product that is not that expensive. It builds relationships. Use price promotion deals for building customer relationships rather than just creating one-time buys. For example, instead of a restaurant owner offering $60 worth of food for $30, parcel it out to offer $20 worth of food for $10 over the customer's next three visits. Don't offer discounts on a total bill, rather offer a specialized discount for various products or services.
It generates increasing revenue. Give a large chuck of cash upfront that may be much needed at this time, as well as the exposure and the goal of generating new business. Each merchant must know their costs, calculate the suitable offering prices, project the number of costumers that will buy the coupon, and estimate incremental revenues.
Cons and tips
Collective buying is one of the biggest trends in the market right now, especially in an economy where 50-70 percent off deals is much needed and appreciated. But as a business you cannot allow yourself to be sucked in without doing the proper research and consideration. Running a group buying deal could be life changing for your business, but it could also be a dangerous solution for those greedily looking to make some quick cash. These are some tips for you when you are considering a group buying deal without seeingg its negative sides:
Do the math. Make sure you are not coming out too far under. Assess the...