24 May 2010

1 Collective Buying Power – Does it Pay to Play Together?

First there was Groupon, then came Buywithme, Qponus, LivingSocial, and Coupme ferrying in the online collective buyers dream.  In a tough economy, consumers love a deal. These sites provide an opportunity for consumers looking to save a buck to connect with local businesses looking to make one. Does it really pay to play the together game? In one word, definitely!

In our technology driven world it is increasingly important for businesses, whether big or small, to participate in internet marketing. With the limited marketing budgets that many small businesses operate on, collective buying sites provide an opportunity to reach out to new consumers. While Groupon is predominantly the heavy hitter that has grown in leaps and bounds with over 2.5 million users nationwide, each of these websites allow people to save money.

How it Works
Each day the sites feature a new local special that typically ranges from a 40-90% discount. Subscribers receive a daily email alerting them to the special the site is offering. If a consumer is interested they can click on the “Buy” button. The service will then send the consumer their deal or load it into the consumers account, depending on the service.

In addition, most of these services offer incentives to users to spread the word about a deal. For example, many sites provide a special referral url to the deal. With Groupon if someone a user refers then buys the deal, the user will get a $10 credit toward their next deal. LivingSocial will give the user their deal for free if at least 3 people they refer also buy the deal.

How Businesses Can Benefit
The biggest benefit to businesses is that your business uses their email marketing system to reach new consumers. Businesses are able to reach a significant number of consumers in their specific area that they may never have reached otherwise. So not only do you get the word out about your business, but it also provides a significant source of new customers. On average businesses report see a significant spike in incoming business following being featured on an online collective buying site.

Business owners offer the deep discounts and depend on volume as a return on the investment. To insure that the business makes money off of the deal, the site sets a minimum number of discounts that have to be bought before the deal is active. If not enough users purchase the deal they pay nothing and the business’s deal is essential off. However after meeting the minimum number of deals bought the deal becomes active. These sites generally do not require a payment from the business. The site will keep a portion of the total purchases and pay the business the remaining income from the deal. It's a win-win for retailers and consumers.

What do you think about collective buying power and would you use it for your business?


Anonymous said...

Looks like is now launching as well. Pretty crowded space, but seems to be booming.

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