The biggest development in the small business marketing space in the last two years has been group deals. GroupOn have lead the way but their success has drawn the attention of hundreds of imitators. You see, the technology behind GroupOn can be bought off the shelf for a few hundred dollars. However, their true value does not lie in the tech it resides in the marketing list that they have accumulated. They have leveraged Google Ad Network and Facebook Ads to build lists of people who are interested in getting bulk deals for their city.
They are a triumph of paid Internet advertising (that’s another blog post). So with the launch of Google Offers and Facebook Deals, their two biggest marketing channels are now entering their market space.
So what does this mean for GroupOn? Well, they are used to competition. GroupOn clones have sprung up in every city and the market still does not seem saturated. If anything it’s these GroupOn clones that will lose out. Also, people who have signed up to GroupOn, signed up to receive emails on deals in their city. People on Facebook and Google may not necessarily want this type of notification. They are going to have to convert current users to opt-in to their deals.
What it may do is squeeze profits for group deal companies. Currently they take between 30% and 50% of the deal price. I can see Google and Facebook taking a little less to attract businesses to use their service.
From a small business marketing perspective I believe that group buying is not as great as everyone makes out. It can work in some cases but in a vast majority it doesn’t.
Yes you get cash flow but the extreme discounts mean that many deals end in a loss for the business concerned. They are pitched that some customers will return for full price services. I am skeptical about this, because the type of person who uses a group deal will simply use another deal from a different business, when they require the same service again.
For restaurants it may work if customers are upsold wine etc. But overall it ruins the repeat business aspect of marketing. Smart marketers know that repeat business is the holy grail of marketing.
It also devalues your service. If you can afford to give 75% off now then you must be really ripping me off at full price. My advice to small business owners is to think long and hard about “unintended consequences” of group deals before they take the plunge. They should develop a strategy to upsell as much as possible.
I don’t believe that added competition from Facebook or Google will have much of an impact on GroupOn. People will go for the best deals whatever platform they are offered on. As long has GroupOn maintains and grows their list they should be fine. We have yet to establish a scarcity point in this marketplace. I think there is room for more competition.