To Use or Not to Use: Social Buying sites

Posted in Social Media | August 25,2011

Services like Groupon, LivingSocial and BuyWithMe are popping up everywhere. Lots of businesses have experimented with these so-called Social Buying sites, but is it right for your business? The answer is: it depends.

It’s all a numbers game Typically, here’s how the sites like Groupon work:

  • Groupon works with you to create a great offer.
  • Let’s pretend it’s the $100 widget you’re selling.
  • A great offer would be purchasing the $100 widget for a discounted rate of $50.
  • Groupon sends out the offer to their large subscriber base in your area via email, mobile applications and website, at no charge to you.
  • The customer purchases the deal through Groupon.
  • Groupon does a revenue share on the deal, typically 50-50.
  • So, in this case, Groupon would keep $25 and would give you $25.
  • In short, you’re getting paid $25 for a item typically priced at $100.

If you can break-even or make a little money on the deal, Groupon is typically worth it – especially if your product or service isn’t a one-time deal. For example, restaurants and businesses like salons, typically do very well with Groupons. If they can provide a great first experience, the customer could turn into a regular.

While there is not shortage of complaints of people who had an unsuccessful Groupons like this one who called it the single worst decision of her life, there are not shortages of business doing it right. Take The Rib Man, for example. He viewed his Groupon has a huge success – people spent more, tipped more and came back.

Will it work for me? Ultimately, not everyone who participates in a Groupon will be successful. It’s a numbers game, but it’s also a preparation game. We have learned you need to be staffed appropriately and, if applicable, make sure you give customers a reason to come back. If you’re really smart, you’ll find a way to up sell them and get their information (email, text message opt-in or social media following) so you can stay in touch with them about all the amazing things happening in your business.