May 28, 2010

A new "group buying" trend is emerging on the web, in which consumers effectively band together to get better deals or discounts when purchasing products and services. One of the flagship group buying web services, GroupOn, was recently valued at over $1 billion – providing a sense of just how big this sector could become.

Other services like LivingSocial have raised significant funding. A fleet of other competitors are cropping up as well, from Tippr to Lifebooker to a number of smaller localized deal sites. Although still technically in its early stages, group buying is poised to become one of the bigger trends to emerge in 2010.

Most group buying sites tend to offer localized deals and discounts in specific cities. Typical offers include percentage discounts at participating restaurants, coupons for savings off a minimum purchase at retail stores, two-for-one event ticket specials and other similar deals. Typically, each promotion only becomes valid if enough members sign up for it, encouraging viral sharing of individual deals. If the minimum sign-up is not met, the deal does not proceed and no one's credit card is charged.

Should Small Businesses Pay Attention Yet?

What does the group buying trend mean for small businesses? Is it time to pay attention or too early to get excited?

In some ways, the situation is similar to how small businesses might consider involvement with another emerging trend: location-based check-in services like Foursquare. Neither trend has reached the critical participation stage, but both have advantages depending on the nature of your business and clientele.

For small businesses that cater to a tech-savvy, early adopter type of customer or audience, getting in early on an emerging trend can be a good move for your brand. Participation in online group buying could strengthen the perception of your business as a forward-thinking entity by showcasing your awareness of new trends and your initiative to dive in and experiment with them. If an integral part of your company’s culture includes embracing new tools, being agile, and encouraging innovation, getting involved in group buying could promote your mission both internally and externally.

A New Opportunity to Serve Your Customers

Another way to look at the group buying trend is less as something entirely new and more as a novel twist on the long existing practice of rewarding your best customers with special deals and promotions. Companies have been placing paper coupons in circulars, sending snail mail flyers, and offering discounts online for years. Now, businesses are adding the "group" component to the equation, bringing with it a dimension of new customer attraction.

If you can get some of your existing repeat customers interested in a group buying deal, they may actually help get the word out about the discount and your brand by evangelizing it to their friends. They have great incentive to do so, not only because they already like your business, but because the more people who sign up for the promotion, the better chance they themselves have of securing the deal. Ortiz Fitness, a Brooklyn-based exercise boot camp recently offered one month of classes (five, 45-minute classes each week) for only $47 through Tippr. To make the group sales discount more appealing owner Bryan Ortiz decided to include a 30-minute personal training session for free. It’s a package that would normally cost $242, and the deep discount brought in 83 new clients. “It was the best three days I’ve ever had in terms of business,” said Ortiz. “It brought in prospective customers with a low risk offer and it saved me from having to pay for additional marketing like Facebook ads.”

When done right, a good group buying deal can be a win-win viral promotion for your business that keeps existing customers happy and brings in new patrons.

Opportunity, But Not Obligation

It's doubtful that group buying will fizzle out any time soon, so if your business simply lacks the bandwidth to get started with it now there will still be opportunities waiting in the future. On the other hand, if the trend matches your business’s purpose and interests, you could benefit significantly by getting involved earlier.

For now, the trend is still fairly nascent, and falls into the category of "opportunity, but not obligation." There's no rush for most small businesses to dive in, but if group buying is a good fit to move your brand forward now is a great time to get involved.

Join the conversation ( 4 )

• Mark Morris 3 months ago

  

  Have any one check out http://www.yourdailydealsite.com/ about starting your own daily deal site ?

  • Stephanie Stumpf 2 months ago

    

    Mark - are you looking to start your own Daily Deals site? If you are, I encourage you to first check this out!
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    We are launching a next generation company in the group buying arena. While there are thousands upon thousands of sites that are trying to copy the massive success of Groupon, the biggest problem is they are all doing the exact same thing. The industry that exists as it does today is severely flawed. As a first generation company that is only to be expected - there is no way for them to for see every avenue. We have had the luxury of watching this exploding industry very closely, and learned just exactly where the improvements were needed.
    
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    • Stephanie Stumpf 2 months ago

      

      and if you are still left unsure - try to wrap your head around VIRAL!
      
      We will consume the industry. We will do to Group buying what Facebook did to Myspace.
      
      You can either be a part of it, lead the expansion into new areas, or sit back and watch it happen. Either way, its happening. Someone in the very near future will contact you again about this opportunity, they might ask you to assist THEM in opening up your community. Are you a leader or a follower?
      
      Serious, business-minded inquiries only.
      
      Stephanie
      651.380.9392
      stephstumpf@myclearwave.net
      http://www.dailyreferral4biz.com/how_it_works

• Kevin Beatty 1 year 6 months and 18 days ago

  

  With over 90 daily deal sites all throughout the US, the group buying model is definitely not a fad. A company that's taking this model to the next level is Deal Current (http://www.dealcurrent.com). They provide a white label daily deal platform that media companies and local entrepreneurs can utilize to create their own branded daily deal solution.
  
  
  They've landed some large media clients so far: check out these sites: http://morgansdeals.com and http://www.idinedeals.com
  
  It's going to be interesting to see how the daily deal space will play out, but I love the model Deal Current is developing.