A Closer Look at Social Buying and Your Business

5 Nov

Social Buying is all the rage these days. As a business owner, you are probably thinking-“What are the business benefits of social buying?”, “Should I be offering a deal?”

Competition is fierce. There are new deal sites popping up everyday. Since I last wrote about social buying sites, I’ve come across many more social buying companies.

What are the advantages to your business offering a social buying deal?

  • Exposure-Your business essentially gets free advertising online. Meaning, you are not obligated to provide any service until the deal actually goes through. Once the deal is over, your business will still show up on the site in the ‘Past Deals’. There is no risk: promoting is free, not to mention the group buying site will only profit share on deals sold.
  • Attract new clientele: If the deal is interesting, you may attract people who may have not known about your business or services and will now be more inclined to try them.
  • Potential to upsell: Once these customers have purchased a deal and come to your establishment, there is the potential to offer them more services. Not to mention, it is also possible that they may end up spending more once they come to your restaurant/salon/gym/studio and so on.   The key is treating these customers just like your regular paying customers-good service and they will return :)

Sounds great doesn’t it? You’re probably all ready to jump in and get in on the group-buying action.  Wait! There are some points that you should consider when making your decision. I discussed the downside of social buying for your business in an earlier post but to recap:

  • While you may attract more customers, they may not always be your target customer-i.e customers that are only looking for a deal.
  • Brand dilution: If you offer deals too often, you may dilute your brand and create the expectation that people should just wait for a discount.
  • Can your business still deliver and support the increase in customers? For example, if your hair salon offers a discount on haircuts do you have enough hairdressers to meet the increased number of appointments?

To address the last point, consider the two following deals that recently were offered in Montreal:

social buying business

social buying business

Note, most social buying sites  do not offer a cap on the number of deals that can be sold (and why would they-they are profit sharing so more deals sold means more money for them), so it is up to you to decide whether or not your business can handle the load. The first deal is valid until October 2011, and 966 deals were sold. The second deal is valid until April 2011 and 1239 deals were sold.  That is great for both businesses as they get paid upfront, but the key is to be certain that you can accommodate all the new customers over the next few months or year as well as absorb the cost to provide services at a lower price.

A lot to consider! If you have any questions, feel free to leave a comment below.

8 Responses to “A Closer Look at Social Buying and Your Business”

  1. Fabrice Calando November 8, 2010 at 11:32 am #

    This a great post! Simple and to the point. I’d like to emphasize your point : “the key is to be certain that you can accommodate all the new customers over the next few months or year as well as absorb the cost to provide services at a lower price.”

    I was speaking to a business owner and he mentioned that this was his big issue – selling at a loss. Loss leaders can be a great way to up-sell later, but you have to make sure your business can handle the lower revenue (or loss). Especially if you can’t cap the number of deals. For smaller businesses that can be tricky. It wasn’t worth it for him.

  2. sandy November 9, 2010 at 4:01 pm #

    Hi Fabrice,

    Thanks for the comment, and you’re right about it being harder for small businesses to sell at a loss. My friend, a personal trainer, had the same issue when she contacted two social buying companies-there was no limit on the number of deals and for her that was not only a financial risk but one that she could not only deliver on in terms of resources.

  3. Shari November 17, 2010 at 10:15 am #

    Hi I was wondering what you think of a ecommerce module on a facebook fan page?

  4. Brian Rotsztein September 16, 2011 at 5:50 pm #

    Great article, Sandy (as is the more current one which I also read)!

    I have researched group buying sites on a somewhat superficial level for clients over the past year or so. Recently, several clients were getting more serious about them and so I dug deeper. I have found extremely little to write home about. Companies like Groupon have almost nothing to lose while small business retailers go crazy trying to fulfill the orders. Many are going bankrupt or are close to it. It’s insanity! There’s so much more under the surface of these deals.

    Also, one note of clarification. It’s my understanding that the group buying companies pay the retailers on a periodical basis, over months, after the deal of the day was launched. This obviously has several negatives associated with it as well.

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