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The Strategy Room

Group-Buying: Get It Right or Pay the Price

By: The Stanton Team

In the past few years, group buying has become a phenomenon. Consumers can save on working out, dining out, and everything in between, by keeping a watchful eye on sites such as Living Social and Groupon.

For businesses, Groupon and Living Social are great ways to draw new customers in the door and build the foundation for a long-term relationship and return business. However, implementing a deal that is wrong for the company or executing it poorly can leave customers with a bad taste in their mouths, and could keep them from ever returning. As a 2010 study from Rice University points out, 32 percent of Groupon deals are unprofitable for business. With that much risk, companies NEED those customers to come back.

As with any marketing initiative, companies must look before they leap into group buying, and once the decision is made to proceed with a group offer, management must ensure the company has the infrastructure and communication in place to support it.  While there are many factors to consider when implementing a Groupon or Living Social deal, following are two critically important questions companies should ask at the outset:

1. Is Group Buying Right for Us?

Rather than blindly jumping on the bandwagon and participating in group buying because everyone else seems to be doing so, smart companies must determine whether the customer it wants to build a long-term relationship with is best courted through this method. In other words, is a person who can afford a pool table that costs as much as a Lexus going to scour coupons sites to save a few bucks?  Moreover, is the person who jumps on a deal likely to represent a lifelong customer for such a high-end merchant? I scratched my head when a local retailer selling high-end leisure furniture and billiards issued a Groupon entitling customers to $200 in goods for $50. Knowing the store had some kitchen supplies I needed, I purchased the deal. When redeeming my Groupon, I was ignored for the hour I shopped in the kitchenware section, while the shoppers eyeing luxury outdoor sets were attended to instantly. I was treated poorly at check-out (the sales person even asked in an accusing tone if I had the Groupon before I presented it), and it was clear that I was not a target customer.

I got what I wanted out of the Groupon, but I doubt the company got what it wanted out of me. I won’t be returning, and I imagine there are others who participated in the deal who feel the same way. This is one case where a group deal just wasn’t the right fit for the offerer, and it was made clear from the moment I walked in the door to the minute I cashed in my coupon.

2. How Will We Communicate?

Once a company determines a group deal is the right fit for its target customers, management must communicate with and prepare employees for the deal. This includes everything from informing them how to process the deal, to explaining why it’s important to the company and how they can play a role in creating long-term benefits from the deal.  Front-line employees are the face of the company, and it’s essential that they respect customers—even if the customer is the 200th cheapskate to come in that day with a Living Social deal. These employees are the key to getting those customers to return, someday at full-price, and could alternatively be the reason the customer never comes back.

Poor communication is the reason why I won’t return to a yoga studio where a front desk employee made me feel inadequate and unwelcome when I redeemed a Living Social deal.  My experience was so bad that I ate the cost of my deal because I couldn’t stand the thought of interacting with the studio’s staff a second time.

Getting it Right

Nothing builds a customer’s relationship with or loyalty to a business better than feeling welcomed and appreciated, even if he/she is using a coupon. That’s how I felt at a different yoga studio, Baltimore’s Bikram Yoga, which issued a group deal last year. Here’s what the company did right:

  • Friendly Faces and Organized Processing – The studio’s front desk attendants were kind, despite dealing with a crowded room of “newbies” who were there to redeem their money-saving Groupon.
  • Involvement from the Top-Down – It wasn’t just the front desk attendants who put on a smile and thanked us. The owner, who was also the instructor, was thrilled to see many new faces in class. She encouraged new students to email her with questions.
  • Genuine Follow-Up Communication – After class, the instructor/owner sent an email to everyone from class who was new, outlining tips about how to recover and hydrate after Bikram Yoga, and encouraging us to keep trying Bikram Yoga, even if the first class was tough.

The company’s employees expressed appreciation for my business from the time I got to the lobby, to the time I got an email several hours after class ended…And even months later when I received an email about redeeming a free class for my birthday.

A company’s product or service isn’t going to sell itself. A Groupon or Living Social deal isn’t going to do it alone either.  While the concept of group couponing is relatively new, some good old-fashioned customer service is as important as ever in implementing group buying initiatives.




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