Wednesday, February 23, 2011

So do sites like Groupon or Living Social work?

If you're a consumer business, how can you get a bunch of customers, really, really fast?

Whilst Groupon isn't operating in Australia, if you follow marketing news, you'll have got the gist of who they are - essentially a "deal a day" from all sorts of business. In Melbourne I subscribe to the Living Social offers - and whilst I've yet to buy, I have forwarded on items to others and they've bought. Now whilst the shopper in me loves a bargain, the marketer in the me wonders ... is it successful for businesses? And could it pay for itself, at least enough to pass my "zero budget marketing" litmus test (you need to make a lot more than you spend from any marketing!).

My gut feel would be that a great offer will get a great response. And a great offer to someone like me is a deep discount. There's nothing more irresistible than a serious bargain...

So even if they sale isn't "profitable", the value would likely be in the database building. That said, experience also shows that "vouchers" (coupons in American lingo) see people spending MORE than the value of the voucher.

So I was interested to see this post on Digital Buzz's blog, discussing some research on those who'd advertised in the US with Groupon. The upshot seems to be that it IS more profitable than unprofitable...and that around 50% of buyers spent more than the coupon value in the case of the profitable ones. The post highlights a specific example for American Apparel, where a $25 coupon worth $50 generated an average spend on $70.

Now, the missing piece of the puzzle is what it COSTS to get your offer onto a service like Groupon or Living Social. If anyone knows, do share!

2 comments:

rankreviews said...

On this topic, I find it interesting that amongst all the comparisons between flash sale sites like Groupon, LivingSocial, Gilt, Jetsetter, Rue La La, etc. and their advertising strategies, their daily email marketing strategy is not thrown in the mix.
groupon vs living social

Kimberly from Brazen + Networx said...

Good point - do you know/have you noticed the difference between them?