Increasing numbers of small businesses are tapping into the power of group buying, an online phenomenon that is attracting millions of bargain-hungry shoppers.
Group buying websites such as Groupon, WagJag, TeamSave and LivingSocial provide deep discounts on products and services with deal-of-the-day coupons. The premise is that the deal only goes through if enough people buy within a limited period of time.
Entrepreneurs who participate in these promotions can enjoy a healthy sales bump. But BDC consultant Chris Murray says group buying should be seen more as a marketing tool than a means to a quick buck.
“Companies will generate short-term revenues through coupon sales but the long-term benefits are building your brand awareness, increasing your visibility and, hopefully, expanding your customer base,” Murray says.
The potential to get new customers in the door should be the big draw for entrepreneurs, Murray says. “If you can get customers through your door with a coupon, you have the opportunity to sell them additional products and services and make them into long-term customers.”
Group buying is a sound strategy to add to a company’s marketing mix but it may not be for every business, Murray says. He offered some advice for entrepreneurs who are poised to get on board.
- Ask yourself if your business is suited to a group buying strategy. Companies more likely to achieve long-term benefits with coupon-based sales are those that depend on referrals and repeat business such as spas, restaurants and service-oriented firms.
- Do some basic market research and determine if your deal will appeal to customers. Some group buying sites post past deals where you can see what people are buying and which deals have been successful. Keep your eye on the market and watch for opportunities.
- Make sure your product or service has a unique selling point to stand out in the crowd.
- If you draw customers through deep discounts, provide them with a reason to give you repeat business such as exceptional customer service or a unique offering.
- Exercise good reputation management. With the increasing presence of sites reviewing company products and services, it’s important that you don’t stray from your deal. Stick to what you promised to avoid seriously damaging your company’s reputation.
- Measure your results. For example, even though your sales through coupons may not meet your expectations, they may generate traffic on your website. Web analytics software can help you track leads and possible customers.
- Prepare your team for increased business volume as a result of the promotion and consider compensating members for the extra work load. At least, recognize the effort and thank them. A promotion that leaves your team disgruntled could do more harm than good for your business.
Content in this section is provided in partnership with the Business Development Bank of Canada. BDC provides entrepreneurs with financing, venture capital and consulting services. To find out more go to BDC.ca.