Group Buying: Rethinking an Idea with Potential

Group buying is a relatively new idea that has had success but whose waning value calls for a different approach

The group buying concept started in China, where retailers provided discounts and special offers for customers to come in and purchase certain products and services. It was later adopted by sites such as Groupon, which offered the deals and discounts on merchants’ behalf. At first, the approach was successful, and retailers capitalized on a surge of customers to their stores to buy the specially promoted products. Offers on group buying sites started to go viral, further increasing the returns on these one-time sales.

Before long, however, the concept began to dilute brands into homogeneous offerings. Customers made their purchasing decisions based on the price and timing of the offers more than any brand differentiation or loyalty. Group buying deals became like dime-a-dozen flyers that no one paid attention to anymore. Why?

Retailers adopted the idea without understanding the nature and needs of their customers. Mass offerings were created with no customization, aiming simply to reach as many people as possible to increase store or website visits and purchases. For many, this ate up their marketing budget, leaving no room for targeted outreach efforts.

However, with the right approach, group buying can be successful in not only creating leads, but also in generating revenue. Here are a few recommended tactics:

1. Customize It

Customer behavior is key in crafting any offer. What type of group do you aim to attract? Do you target customers with specific cultural backgrounds, genders, style preferences, lifestyles? Do you sell a product or service that friends might purchase together? Groups of friends are the most conscious about the purchases they make; a friend has more influence over a choice than a family member, for example. Or perhaps a special offer combining one product or service with another would have the most appeal. Retailers who control the type of visitors when planning a group buying offer typically have better sales. Mass selling doesn’t work; customer preference is what builds customer loyalty and frequency.

2. Strike at the Right Time

Daily—or even weekly or monthly—deals do not always work. The day one customer looking for a deal on a specific product or service is often different from the day another customer is searching for the same product or service. When retailers started the concept of group buying, it was to generate sales during slow seasons. But those times aren’t necessarily when the customer is looking. Customers can be very fickle, and retailers—whether brick-and-mortar or online—must understand the right timing for their customers and extend deals accordingly.

3. Make It Mobile

The best way to reach today’s customers is through their mobile phones. Apps and social media sites are part of their daily lives, so using this technology is a great way to boost engagement and sales. Inviting different groups of individuals to socialize through your app and meet in your store can be an innovative way to sell products. Customizing offers and sending them at the time the customer requests or prefers can also have successful results.

4. Promote a Cause

Another way to make group buying more profitable is to tie offers to something that benefits the community. The more good you do, the more your sales will increase and the stronger your brand will become. Donating a portion of the sale of a product for a social cause will encourage your customers to visit your store or website beyond a special offer—they will want to be part of that cause and will feel good when buying your products. This approach also distinguishes you from other retailers; it shows you are a real part of the community. Reaping the benefits of that is a win-win.