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Four Reasons Why Group Buying Works

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50% off? GOTTA GET IT!

In The Simpsons, the town of Springfield is filled with more beloved characters than any other show. Ask someone who has seen the show who their favorite character is, and you’ll probably hear more people say Moe, Disco Stu, and Mr. Burns than Homer, Bart, and Lisa. While the characters are so vibrant and individual, the town is incredibly prone to mob rule. Nathan Rabin of the AV Club writes:

“Mobs are ubiquitous in The Simpsons: it only takes a tiny catalyst to transform a crowd from a band of angels to a bloodthirsty lynch mob and back again.”

Enter group buying, which turns the internet into Springfield

Group buying is one of the newest trends in social media today. Every day, group buying platforms like Groupon send out a deal via email or mobile phone. It’s a group coupon (Groupon….get it?) that is only activated once a certain number of people opt to purchase the deal. If you accept the Groupon but nobody else does, you don’t get the deal. This allows the businesses involved to use the power of scale and offer great deals.

Recently, Groupon offered its first national deal when it partnered with The Gap (pay $25, get $50 credit at the store), and the public went nuts. Groupons were flying off the proverbial shelves at 10 per second, and at the end of the day 400,000 Groupons had been sold. In the week after the deal, an additional 750,000 people subscribed to the service. So, what’s the big deal? Here are four reasons why I think group buying works.

1. Mob mentality

In order to get the deal, a predetermined number of people have to accept it. It tells you how many people have accepted the deal and how many more people need to accept the deal before it is activated. Here’s where Springfield comes in. One minute, the town of Springfield is just hanging around minding their own business, and the next minute they’ve decided to build a casino or a monorail in the town because one person suggested it. Similarly, it only takes a few people buying a coupon online for others to join in. The slightest nudge from Groupon, coupled with a basic human desire to fit inside of a group, to turn a previously disconnected subset of people into a consumer mob. The internet is full of examples of mob mentality. Viral hits and memes spread (among other reasons) because everyone wants to be a part of some bigger group; they want to be insiders. Think of group buying as “coupons that go viral.”

2. Group buying promotes social sharing

People love to get a great deal. Even more than that, they like to tell everyone they know about it. Scoring a discount is a fun thing for every age, from college students (“DUDE! 2-4-1 drinks tonight!”) to housewives (“I just got $1 off my purchase of Kleenex!”).  It feels like you’ve finally beaten The Man. Groupon promotes social sharing because of the urge to brag about the deal you received with anyone who will listen. With social media, people are able to broadcast their sweet deal to everyone they know (and many they will never meet in person), creating an organic online word-of-mouth campaign. I haven’t yet taken advantage of a Groupon deal (sacrilege, I know), so I’m not sure if they have an option to Tweet their new deal and share it on Facebook, but they definitely should. Even with local deals (the bread and butter of Groupon), you’re able to spread the word to the office,  friends, and neighbors.

3. Nobody wants to miss an opportunity to save

If people love to brag about the deals they got, they sure hate to be the one on the other side of the conversation: The person not in-the-know about a secret deal. Group buying relies on the idea that nobody likes to miss an opportunity; the deal only lasts a day, and if you wait too long it’ll be gone. Nobody wants non-buyer’s remorse. It’s the same thing that happens when an infomercial tells you “Act now! For the next 20 minutes, we’ll sell you our garbage for 50% off!”

4. The deals!

Above all, Groupon and other group buying platforms present pretty great deals, with benefits for the consumer and the business involved. Many of the deals are for vouchers or credit at a restaurant or business, so you aren’t obligated to use that deal the day you buy it. This gives flexibility to the consumer and ensures that the place of business isn’t walloped by customers on just one day. The consumers also get a great deal; it’s very common to see offers for half-off or more. Group buying is also great for small, local businesses. I’ve seen a lot of deals for things like canoe rentals and nail salons, services that you’d never really think about in the first place. Group buying gives exposure to small businesses, so it’s no surprise that Groupon says 97% of businesses featured want to use it again.

It appears that group buying is going to stick around for a while. It will be interesting to see how it adapts to technology; tying group buying with other social media would be very interesting and likely lucrative. As social media grows and changes and life becomes more mobile, group buying could be integrated with geo-targeted ads and location-based services to create a unique experience for each consumer.

What do you think of group buying? Have you bought a Groupon deal yet?

(Photo via)

1. Mob mentality

In order to get the deal, a predetermined number of people have to accept it. It tells you how many people have accepted the deal and how many more people need to accept the deal before it is activated. Here’s where Springfield comes in. One minute, the town of Springfield is just hanging around minding their own business, and the next minute they’ve decided to build a casino or a monorail in the town because one person suggested it. Similarly, it only takes a few people buying a coupon online for others to join in. The slightest nudge from Groupon, coupled with a basic human desire to fit inside of a group, to turn a previously disconnected subset of people into a consumer mob. The internet is full of examples of mob mentality. Viral hits and memes spread (among other reasons) because everyone wants to be a part of some bigger group; they want to be insiders. Think of group buying as “coupons that go viral.”

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  1. September 23, 2010 at 11:40 am

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