How to Make Group Buying Work for You

Thu, 16 Jun 11

Groupon.  Scoopon.  Spreets.  Catch of the Day...  Sound Familiar?
These are the names of some of the online businesses taking the world by storm due to their group discounts, offering consumers up to 80% off products and services if enough interest is registered.  On the surface, the benefits of signing up your products and services to one of these sites seems indisputable as the increase in awareness and sales for businesses is extremely positive. However, to make this activity work for your business, you must plan ahead for how you will manage greater production and how you will stay profitable when trading at discounted prices.

So what should you consider before signing up? Here are 10 top tips for planning your strategy and using perceived value to create a profitable offer...

• Clarify you goals: Before you go any further review your business goals and objectives... Is this opportunity helping or hindering the path to reaching these?
• Determine your market: Will you reach your market using this channel? Consider who will be using this channel and whether they are valuable to you in the long term
• Know the cost: Find out exactly how much it is going to cost to sell the product. Think holistically, consider increases in wages, wear and tear, etc that will be affected by larger runs
• Consider the impact: How will this activity affect your short and long term pricing strategy? Are you confident that you can continue to make sales once the prices return to normal?
• Stay in control: Negotiate the payment structure and how the sales revenue will be split between your business and the discount site
• Read the fine print: Check your contract for terms and conditions, such as non-compete and exclusivity clauses. Who else will be advertised when your offer goes live?
Compare discount sites: As the phenomenon grows, so do the amount of sites offering these deals. Shop around as you would with any new investment and find one that matches your goals, budget and values best.
 Use products with high perceived value: Consider offering a product with a low hard cost that is still high quality on face value
Be sure that your sales and market process is tight: Are you and your team experts on having your customers come back and purchase from you again? If you are going to “give” most of your profit away, be sure you can make it back with a second or third purchase.
Be ready: Make sure you know the exact date the offer goes live and be prepared to handle the traffic - if you order stock in have it ready to go and be ready to require all hands on deck to handle the orders

The NCB would like to thank BRW Magazine and NCB Course Coach Simon Bell [simonsaid.com.au] for their contribution to this article.

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