In case you haven’t noticed, the world of marketing has been rapidly changing. Thanks to social media and the free flow of communication and word-of-mouth capabilities, marketers are finding new, better, and
moreefficient ways to reach their target market.


One emerging marketing tactic that is catching on is “collective buying” or more commonly called “groupons”. The term “groupon” most likely comes from the site groupon.com,
and it’s name is very reflective of itself. A groupon is a coupon that
offers a very large discount on products and services (usually at least
40 percent or more) if a ‘group’ of people commit to using the coupon
and buying the product or service.


HOW A GROUPON WORKS


Using sites like groupon.com, companies can offer coupons for anywhere from 40% – 90% off their products and services. The catch is, the company can put a minimum cap for the number of coupons that have to
be bought in order for the coupon to be active. For example, a
restaurant can offer a $25 dish for $10 (a 60 percent discount), but
that coupon is only valid if 50 coupons are bought (the page I’m looking
at right now that offered this exact deal and it sold 381 coupons).
The discounts, while they may be large, are generally only offered for
24-hour period. People can learn about these deals by either checking
the webiste daily or usually the site will send out an email featuring
“The Daily Deal” along with how many of those coupons have to be
purchased in order for them to be valid, and they’ll include a live
counte

r with the number of coupons already bought.


WHAT’S IN IT FOR THE COMPANIES?


Groupons allow companies to offer larger discounts because they can ensure that some of the fixed costs are covered and their average total cost is lowered to a point where the company can make a profit. Whereas
some companies may stray away from groupons because they can make only
small profit, there are intangible benefits of a groupon over a
traditional coupon campaign, the biggest of those being its viral
ability.


Customers who come across the discount in the early stages are not
guaranteed that their groupon will work because of the minimum cap that
is set. This creates a sense of urgency for them to spread the word
about this deal before the 24-hour time limit is up. Let’s imagine that
a company offers a groupon and the first 20 people who are genuinely
excited to get the offer (we’ll call them “movers”) need to spread the
word to their network in order for their groupon to become valid. Each
one of the movers can tweet it, facebook it, post it on their LinkedIn
profiles and blogs, etc. Let’s assume that each one of those 20 movers
has a network of 1,000 people between all their social media sites; with
that assumption, the company’s campaign has had a reach of 20,000
within the matter of hours. Of those 20,000 people, there are sure to
be others who will take the offer and become movers themselves, reaching
out to their network, and now, in less than a day, the company’s ad
campaign has gone viral. Viral marketing helps top-of-mind awareness as
well as helps drive business.


Has anyone had any experiences using groupons that they would like to share? (to see some other experiences/comments, go here)



-Lance Brown

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