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?
-Lance Brown
I just used this to buy an interesting Christmas gift – a 1/2 day rental of an exotic car (Ferrari!) from a company located in Boston, MA. I got more than 60% off. Haven’t cashed it in yet, of course, but I love this new marketing tactic. Seems like a win-win for all.
Hi Courtney – hope this was a gift for yourself – I’m jealous!
Great posting! Groupon is based out of Chicago. They took over the space in the old Montgomery Ward building. Started with a few employees and now has hundreds. They have an awesome business model which reminds of how Design World started. It is projected do over 1 billion this year and has really put Chicago on the map in the high tech world. The owner, Andrew Mason, is 30 years old. NU grad who majored in music. Social Networking tied to discounts to form collective buying groups – great idea. Happy Thanksgiving, Kristin
Nice succinct post, Lance. I’ve bought a few Groupons as gifts and I love the concept of group discounting.
My question is, how can we (I work for a company that develops/sells CAE design optimization software) apply this concept (or some variant) to our B2B customers?
John Jenkins, VP Sales & Marketing Optimal Solutions (https://www.gosculptor.com)
Hi John – would be great to be able to roll-out a 1 or 2 day offer with a greatly reduced software price if say 20 CAE users sign up and buy – buying a CAD package however is not your typical impulse buy. I use a package called modo and see a lot of training materials- step by step video assets and pre-built models. Perhaps training materials would be a another idea for discounting versus the software itself. Maybe even custom ‘plug-ins’ for a major CAD pakage would have better play.
And while we (Design World) does not have a direct Groupon platform of the sorts (yet), we do have the means to communicate, track and provide the means for doing this.
Good question, when you know, let me know 🙂
Hi John, thank you for the kind words.
As for your specific predicament, it’s true that this would be a bit more difficult. While there may not be a specific company like groupon.com that caters for B2B businesses, it looks like there are B2B companies that offer this same kind of service (looking at DM Matheson’s post about Design World).
While you could use the same basic idea of the groupon, a B2B groupon campaign would probably have to differ a little. Primarily, since businesses do not generally make spur-of-the-moment purchases, you could extend the time frame that the deal is offered to a week or a month, really any time frame you feel is ideal. If you set your target mark at 20 units, decide on a time frame that is long enough for you to reach your goal, but is short enough that it makes the buyer feel a sense of urgency to contact others who may want the software as well and get them on board as quickly as possible.
If you have any specific questions or obstacles to hurdle, I’d be happy to help.
Google looking to acquire Groupon for $6 billion. Largest acquisition for Google to date. https://bit.ly/hX1tlr
Wow! That’s a nice payday if I might say so