20 March 2010

New Social Marketing Trend: Group Buying Sites

Raleigh News Observer

It used to be that companies looking for new customers would take out an ad or make a new TV commercial.

But now a legion of new Web sites are harnessing the power of social networking sites like Twitter and Facebook to help businesses connect directly with customers.

The sites, which are generally called "group buying sites," combine two of many shoppers' favorite things: bulk buying and a hidden deal.
Three such sites - groupon.com, livingsocial.com and twongo.com - started operating in the Triangle in the last month.

All three offer a deal-of-the-day that shoppers can elect to buy. On Friday, Twongo offered a $50 gift certificate to Cafe Parizade in Durham for $27.

Users are encouraged to share the deals via Twitter, Facebook and other social media for an instant word-of-mouth vibe.

Each site, however, has a unique twist on its deal.

Twongo's discount increases as more people buy the deal. For instance, if enough people purchased that Parizade certificate the price would drop all the way to $23 for everyone. Groupon has a "tipping point" - a certain number of buyers are required before the deal becomes a reality. And at LivingSocial.com, if you get three friends to buy the deal-of-the-day, you get it free.

Such Web sites are gaining popularity, said Larry Joseloff, vice president of content for Shop.org, the National Retail Federation's online shopping division.

"I think it's become hip again to find a great deal and to find great value, and I think retailers are trying to find new ways to be creative," he said. "I've heard both schools of thought, that this is a sea of change and that this is a temporary shift. Only time will tell."

The businesses that offer deals through the group-buying Web sites generally don't make much on the offers.

The deals are usually at least 50 percent off what a customer would normally pay in the restaurant or store. But the businesses don't even keep all of that; most split the profits with the site. So Cafe Parizade would get about $12 for that gift certificate and serve up a $50 dinner.

Still many business owners see the sites as just another way to advertise.

"I think a lot of marketing is keeping your name in front of people, and it costs money to keep your name in front of people," said Brad Hurley, co-owner of the 42nd Street Oyster Bar in Raleigh. The restaurant recently sold 277 $50 vouchers for $24 each on twongo.com.

The Twongo deal is better than other advertising methods such as home mailers, Hurley said, because it's a sure thing.

"With more traditional advertising, you have to give something away kind of as a hook to get somebody there," he said. "This way, you're generating some revenue, and if people go online to buy a certificate then there's a real good chance that they're going to come and use it."

Still, business owners should be prepared before jumping into the group-buying social media arena, cautioned Shawn Briscoe, co-owner of the Alter Ego salon in downtown Raleigh. Alter Ego offered a manicure and pedicure deal valued at $55 for $25.

They sold more than 400 of them. Briscoe was expecting a few dozen at most.

"You have to be prepared for the power of it, I think," she said.

The salon had to institute a per-day limit on the number of Groupon coupons they can take.

"Otherwise, we wouldn't be able to pay our rent," Briscoe said.

But overall, she said, she was pleased with the experience; many of the new customers are booking return visits.

"It really blew my mind," she said. "But if we had done haircuts or something, we would have really been in trouble."

As for the sites themselves, they say they hope their growing numbers increase awareness of this type of shopping.

Cary-based twongo, launched in the Triangle on Jan. 22, is already considering expanding to new markets, said Scott Bowen, one of three founders.

"Companies are starting to call us now, which is really cool," he said.

Having started in 2008, Groupon is one of the oldest and largest of the group-buying sites with 3 million subscribers in 40 cities across the country.

The Chicago company launched in Raleigh-Durham on Feb. 7 and has 20,000 subscribers here. It has sold 4,000 deals in the area.

Groupon is trying to entice shoppers by adding things like business reviews and chat functions, said Mark Desky, vice president of marketing.

"We started kind of more as a city guide, but now that we're in so many markets, people now consider us as a travel guide," he said.

And, as social media sites like Twitter continue to expand, group-buying sites see more opportunity.

"I think social media is no longer just for young people," said Jake Maas, CFO of LivingSocial, which is based in Washington, D.C., and launched Thursday in the Triangle and three other cities.

"I think a lot of merchants are surprised at the extent to which they can actually reach out and attract new customers. And they don't have to actually believe us. Because at the end of the day, what they really care about is can you actually deliver customers. And we're able to do that in a very tangible and transparent way."

No comments:

Post a Comment