Group buying: the renaissance of an old economic concept

Any restaurant manager will agree that it’s better to have your restaurant filled with customers that consume very little than a restaurant occupied solely by its employees. How can you prevent this? Here’s a solution: group buying, a hot trend right now in the online world. To me this reminds a lot of eBay back in 1995 when the WWW was just starting. The idea of participating in a huge worldwide auction was super exciting; it truly was an excellent prologue for the things that the web could offer. Let’s have a look at how group buying works and why both companies and consumers can benefit from this age-old economic concept.

Companies like ‘Groupon’ are rising stars on Google in the US

WHAT THE HECK IS GROUP BUYING?

The concept of group buying is very simple: a special offer is posted online (or somewhere else) and if enough people show interest in it, the deal becomes active and consumers can enjoy a product or a service for a lower price (or sometimes a really, really lower price). If you’re like me, the first thing you’ll think is: ok so, what’s the catch? Well, it turns out there is none (at least to my knowledge). If used strategically, companies (and of course consumers) truly can benefit from this. Here are a few examples:

• Consumer goods and diminishing marginal costs: companies like Costco and Walmart know about this concept very well -> the more you buy, the cheaper it gets. Having a minimum amount of people subscribing to a deal guaranties that the truck is loaded when the products are shipped to the store (or at least reaches a break-even point).
• Consumer goods and liquidations: can’t get rid of those old computers lying around in that warehouse in Southern Ontario? Have a sale! Because group buying is all the rage right now, there are plenty of marketing opportunities ahead.
• Seasonal lows: going back to my restaurant example, there are certain time periods throughout the year when people just don’t go eat in restaurants that much. Throwing a special deal to a group of people can help palliate tougher times while showing those people how tasty your food is.
• Word of mouth: ah social networks. So much fun. But when a deal gets so tempting that some people absolutely want it to become active, you can bet they’ll tell all their friends about it. With the technology available today it’s never been easier to spread the word out.
• Up-selling opportunities: ok so you’ve got a customer that holds a coupon that saves him 50% off an HD-TV. How about showing him how he can spend that extra cash?

HOW TO WIN AT ALL OF THIS

In a world where search results are quite rich, SEO & SEM strategies can make it or break it. Because message communication is vital, having a deeper understanding of the social media landscape is also vital. If you’re a consumer, just keep your eyes and ears open, you’ll never know what you can find!

Title image taken from photobucket.com