Getting a piece of the Groupon pie: Part 1

The timing was right for the Groupon phenomenon. Local businesses were finally started to “get” the fact that they could use Internet to reach consumers, and Groupon provided an advertising platform to allow them to do so easily and effectively. BOOM, you have a company valued at $6 billion, almost overnight.

With this kind of money floating around, it’s no wonder there are hundreds of Groupon wannabes lining up. Groupon may have first mover advantage (and 80% of this winner-take-most market), but how can the “smaller” players like Scoop St and Gilt City, just to name a couple of our favorites, get a bigger piece of the pie?

In his excellent survey of the group buying market Dave Ambrose of Scoop St points out three important ways social buying sites can differentiate themselves:

1. Customer Segmentation – Hyperlocal deal offerings, with near limitless demand
   
2. Commerce Meets Content, Community – Unique and customized deal experience
   
3. Merchant Management – Better management tools for small business owners, more customer retention

I think these are all incredibly important, but I’d like to focus a bit more on #3, Merchant Management. I think that social buying sites can do a lot more to help small & local business get more out of this form of advertising. If merchants have a good experience, i.e., if the deal brings in high-value, repeat customers, then they are more likely to come back to do another deal. And furthermore–as Andrew Koch (VP Marketing at Gilt City) pointed out at a great event I attended last month*–the small business world is, well, small. You can bet that merchants are going to talk to each other about their experiences with your deal site & if the experience was positive, you may get a referral out of it.

(*Check out PluggedIn Ventures for excellent mobile and digital media networking and roundtable events run by Eli Mandelbaum and his team.)

So how can social buying sites better nurture their relationships with merchants, so that they can ensure that the deal is bringing them valuable, relevant customers?

Re-Groupon-ing

First, let’s take a look at how business can better utilize Groupons. Going back to what I mentioned at the start of this post, for many small & local businesses this is their first foray into any kind of online advertising. And while many merchants have griped that they haven’t gotten repeat customers and have lost money with a Groupon deal, I would argue that there’s more THEY can and should be doing to capitalize on the visibility they get from such a deal.

Hey small business owners, here’s what I’m getting at: if you do a Groupon and you don’t get any repeat customers out of it, don’t be so surprised. A Groupon (is this becoming a generic word, like Kleenex, or for that matter, Google?) should be one piece of a larger campaign. Getting a customer in your door is the first step, then next is finding a way to re-market to them later. How? Get their email address! Get them to like your facebook page! Get them to follow you on Twitter! Where did they find out about you? That’s right, the Internet. Find a way to connect with them again this way, and start building your own database of customers.

I did a little informal survey around the office just now. Collectively, we redeemed about 40 Groupon-like deals in the last year. How many of those business asked for our email addresses? Less then 5. How many of those businesses emailed us later with an incentive to come back and buy again. Zero. Big fat goose egg.

Why not email them a week later and “re-Groupon” them: offer 10, or even 20% off their next visit? While you’re at it, why not ask gather some valuable consumer insight by offering the discount in exchange for completing a short survey about their experience?

Being a Resource to Merchants

These are just a few ideas – I think that there are many ways small businesses can better utilize online deals. And I think that deal sites, in turn, can better educate merchants about how to gain repeat customers–perhaps via a marketing blog geared to small business owners. If deal sites can position themselves not just as an advertising platform, but as a trusted resource for these merchants, they will increase the value they bring to their clients, and in turn increase their own referral and repeat business.

Next week I’ll talk about one of Groupon’s biggest secrets to success – affiliate marketing. Stay tuned, and get in touch if you’d like to learn more about our Digital Marketing Services.

Ok, your turn. How do you think deal sites can get a bigger piece of the Groupon pie?