Group Buying For Business: Advantages and Disadvantages

Group buying websites and applications, such as Groupon and Living Social to name but a few, have taking the consumer landscape by storm, by offering location based discounts and special promotions from a variety of businesses. These sites may be highly beneficial for the consumer, but what do they mean for businesses?

The Advantages of Group Buying

Group buying is, above all else, a very useful marketing tool, as it promotes brand awareness in a focused fashion to a large audience. Geo-targeting consumers aids not only in promoting your business but in gaining loyal and repeat customers.

If your business is already established, the marketing power of group buying can be used to launch and promote new services and products.

And the best part is, all the vouchers purchased through these sites and apps are prepaid, and run for a limited time, meaning businesses receive a lump sum for products and services sold via the sites.

The Disadvantages of Group Buying

Group buying is not something that will benefit all businesses. Those who don’t usually sell directly to the consumer may not benefit from the marketing benefits offered.

Unfortunately, although these sites help promote brand awareness and sales, because you are reducing the price of the product or service you may find your profits are hindered initially. When planning to use group buying, financially plan for it as a marketing expense, rather than an income strategy.

Although group buying is undertaken to draw in new custom, beware that regular and loyal customers may find and purchase multiple vouchers. And the new customers will still need something to draw them back other than further vouchers in order to turn them into repeat customers.

Beware that group buying sites often result in an influx of traffic and custom, so make sure your business is prepared, as if your customer service fails, the venture will not have been a worthwhile investment and your reputation could end up damaged.

Group buying can benefit your business on a large scale, but only if it is right for your business and you are equally prepared. Be sure you know what you are getting into before you take the leap, and ensure you’re company is able to take losses, as they are a probability.

Are you a business who actively participates in or has previous used group buying? How did it work out for you? Share your story and thoughts!