Techblog
Unveil the power of group buying
Group buying gained prominence in parts of Asia when it was introduced during 2010, with many new websites in the region cashing in on its popularity. Why did this new form of marketing work? How can you tap on this trend to boost your sales? Read on to find out more.
By the myBusiness techblog team
At first glance, there is nothing strange or novel about the concept group buying - people just like good deals in general. However, beneath the surface of its simplicity, lies a calculated marketing strategy based on leveraging a customer's psychological habit. Let's see how group buying works.
The psychology of group buying
Group influence is one of the most important factors that allow group buying to be such a success. We know that social media helps promote brand exploration, and users are also more likely to make purchases based on what their friends recommend. The power that group buying holds is that not only are great deals offered, but the exploration and interest in the items offered are magnified due to the sharing.
Here's an example to illustrate why a customer buys a product through group buy:
Imagine if a close friend of yours shares a deal that they found on Groupon. You normally don’t take a second glance on these offers, but since your friend has shared it, you are more interested to see what's so special about it. After checking it out, you notice that the offer sounds good, and is only valid for today. Suddenly, the deal looks and sounds better, and you start thinking, I better snatch this good deal up quickly because I won’t have the chance to tomorrow.’ You then click the "buy now" button.
Businesses and group buying sites often leverage on the following:
- Urgency - Giving buyers a sense of urgency due to time restraints
- Exclusivity - Offering buyers a sense of exclusiveness through limited quantities
- Social Sharing - The likeliness that users will share with others in their network and influence them
When businesses participate in a group buying effort, they gain so much by tapping into the social aspect of these platforms. Besides the potential sales that they are gaining, businesses also reach a whole new audience - buyers who frequent the group buying site, as well as their recommendations (in order for the offer to work). Before you go off and immediately work with a group buying site, here are some things to consider:
1. Calculate the Value of Each Customer to Your Business
You need to calculate how much each customer is potentially worth to your business based on the following three outcomes:
- Initial Sale - Remember you're offering your customers an awesome deal and paying a sales commission to the Group Buying site.
- Up-sell Opportunities - What else can you offer your customers to enhance their purchase. What can you do so that your customers will make additional purchases?
- Repeat Business - How regularly will your customers come back and purchase again. If you're business has a regular purchase cycle like hairdressing, it might be worth putting a more aggressive deal forward. However if you're running a tourist attraction or a business with a longer repeat cycle, you need to take this into consideration.
2. Set Limits to the Minimum and Maximum Number of deals
You need to understand that once you offer these deals, you need to already have a good idea of the resources you need to follow through with the deals. Offering a deal and then having to cancel it will lead to a loss of reputation. A good way to avoid this would be to set a limit to the minimum and maximum amount of deals. This helps to moderate the amount of resources required, allowing you some "breathing room".
3. Choose the Promotional Time Carefully
Think about the nature of your business and the weekly or monthly cycles you may go through. For example, if you run a restaurant and your busiest time period is a Friday night, you’d want to limit the number of vouchers that can be redeemed during those services. Alternatively if Lunch services are slow, you might want to create an inviting lunch time deal.
Ultimately, your business will likely find benefit in experimenting with group buying sites once you establish some benchmarks with their sales history.
If you're interested in getting a good deal yourself, Singtel's myBusiness portal has recently launched its Group Deals section on its Trading Board. By getting more people to buy the products with you, you can get great discounts on items such as Lenovo laptops, printers or thumbdrives. There are even selected items that will feature discounts of up to 35%. Check out the offers and enjoy huge discounts today by clicking here.
Do you see a future in group buying? Do you see more group buying sites popping up? Are there long term benefits to these sites, or could it just be a trend that will continue to grow or die down? Let us know in the comment box below.