How Groupons Drive Buisiness
In case you haven’t noticed, the world of marketing has been rapidly changing. Thanks to social media and the free flow of communication and word-of-mouth capabilities, marketers are finding new, better, and more efficient ways to reach their target market.
One emerging marketing tactic that is catching on is “collective buying” or more commonly called “groupons”. The term “groupon” most likely comes from the site groupon.com, and it’s name is very reflective of itself. A groupon is a coupon that offers a very large discount on products and services (usually at least 40 percent or more) if a ‘group’ of people commit to using the coupon and buying the product or service.
HOW A GROUPON WORKS
Using sites like groupon.com, companies can offer coupons for anywhere from 40% – 90% off their products and services. The catch is, the company can put a minimum cap for the number of coupons that have to be bought in order for the coupon to be active. For example, a restaurant can offer a $25 dish for $10 (a 60 percent discount), but that coupon is only valid if 50 coupons are bought (the page I’m looking at right now that offered this exact deal and it sold 381 coupons). The discounts, while they may be large, are generally only offered for a 24-hour period. People can learn about these deals by either checking the webiste daily or usually the site will send out an email featuring “The Daily Deal” along with how many of those coupons have to be purchased in order for them to be valid, and they’ll include a live counter with the number of coupons already bought.
WHAT’S IN IT FOR THE COMPANIES?
Groupons allow companies to offer larger discounts because they can ensure that some of the fixed costs are covered and their average total cost is lowered to a point where the company can make a profit. Whereas some companies may stray away from groupons because they can make only small profit, there are intangible benefits of a groupon over a traditional coupon campaign, the biggest of those being its viral ability.
Customers who come across the discount in the early stages are not guaranteed that their groupon will work because of the minimum cap that is set. This creates a sense of urgency for them to spread the word about this deal before the 24-hour time limit is up. Let’s imagine that a company offers a groupon and the first 20 people who are genuinely excited to get the offer (we’ll call them “movers”) need to spread the word to their network in order for their groupon to become valid. Each one of the movers can tweet it, facebook it, post it on their LinkedIn profiles and blogs, etc. Let’s assume that each one of those 20 movers has a network of 1,000 people between all their social media sites; with that assumption, the company’s campaign has had a reach of 20,000 within the matter of hours. Of those 20,000 people, there are sure to be others who will take the offer and become movers themselves, reaching out to their network, and now, in less than a day, the company’s ad campaign has gone viral. Viral marketing helps top-of-mind awareness as well as helps drive business.
Has anyone had any experiences using groupons that they would like to share?
