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Inside Group Buying: 7 Small Business Success Stories
Group buying is one of the latest trends in small business marketing. Groupon and LivingSocial are the two big players in the social buying universe, but there are many more group buying sites popping up around the web every day. From what we’ve heard, they’re all pretty competitive with each other — vying for attention and even exclusivity contracts from interested business owners. Sorting out the pros and cons of each sites is a task, and for the smaller, newer group buying sites, most of the information to help small business owners make decisions is from the group buying sites.
With this installment of the Small Business Round Table Series, we hope to democratize that information. We brought together seven small biz insiders to talk about how their small businesses are using group buying sites, including Groupon, LivingSocial, Tippr and Scoop St. Our knowledgeable round table attendees included:
- Ortiz Fitness owner Bryan Ortiz
- Butter Lane co-owner Maria Baugh
- Luke’s Lobster co-owner Benjamin Conniff
- Pure Power Boot Camp owner Lauren Brenner
- Outdoor Bound co-owner and guide Kirk Reynolds
- Orchid Aesthetics marketing director Owen Siegel
- Ricardo Rojas Salon partner and director of marketing Jim Mannino
The attendees shared their thoughts on the effects that using group buying sites have on sales, brand image, customer loyalty and more. Read on to see what they had to say.
1. When did you first hear about and decide to try group buying sites?
Reynolds: “I first heard about [group buying sites] from our clients on trips, where we’d be driving out to do a rock-climbing trip and have an hour and a half to kill in the van; people were checking their iPhones and BlackBerrys and are passing on deals: ‘Oh my gosh! Look at this great deal.’ So, that’s the first time I had heard of it, just from little fires within our own trips.”
Baugh: “One of the early employees of the shop told me about Groupon. So, I went to the site and got in touch with them, and we’ve had a great relationship ever since.”
Mannino: “We were introduced through a referral. We have a lot of special events at the salon, and somebody had forwarded an e-mail for a deal, ‘buy this value of wine for this amount of money.’ We produce the events ourselves a lot of the time, so we were hooked after that.”
Ortiz: “For me, it was through one of my students. She’s a big social media freak when it comes to things like that. She said, ‘You know, what would really double your business is to get on a site like Tippr. It’s a new site that just launched.’ And coincidentally, I saw them put out an ad when I was checking my Gmail. I contacted them, and that was my first experience with group buying. They were brand new — I think they launched a week after I contacted them.”
Conniff: “We talked to a lot of [group buying sites], but the founders of Scoop St. are graduates of Georgetown University and actually knew Luke [Luke Holden, founder of Luke’s Lobster, also a Georgetown alumnus] from college. So, they were actually just starting in the city when we worked with them. I think they ran into each other at a Georgetown alumni event and got to talking and went from there.”
Brenner: “Knowing that I’m not as hip with the online marketing world, my clients told me what [group buying] was all about. I called up and sent an idea over, and Groupon was all over it. Since then, I think every [group buying site] out there has called me — incessant, it just doesn’t stop. But I’ve been very loyal to Groupon.”
Siegel: “I first got involved late last year. I was a little hesitant at first, because some of them chisel you down. So, I worked with Groupon for a long time last year, and then they wanted us to do facials for $21. I said ‘Forget it,’ and hung up the phone after six months. But then more group buying sites started contacting me, and we realized that we could get better deals with them.”
2. How do you get started and come up with the perfect deal?
Siegel: “They contact you.”
Baugh: “It’s a collaboration.”
Ortiz: “It’s a mix, I think.”
Brenner: “Right. I think that once they see a deal, like if you are on Groupon, and now LivingSocial sees your deal and they see it’s successful, they’ll call you and say ‘Do the same thing with us.’ And now they’re set because they see it’s a proven commodity — they want it to be a home run for them.”
Reynolds: “[Group buying sites] also get to see the style of a deal that moves really quickly. They’re looking for the impulse buy. So, if it’s something that’s a really attractive price point, something that you can visualize really easily, which makes it an impulse buy — then, they can say ‘I see what you’re offering and what your products are. I think this would be the one that would sell the best.’ So, it is a collaboration.”
Ortiz: “I first reached out to Tippr and said ‘I want to run a special for my boot camp.’ And they were happy to feature it. They were having trouble getting merchants on board with it. So, they said, ‘We’ve never done anything with fitness. Let’s try it.’ I did a special for $29, and it yielded 82 people with that one shot… And then after Tippr, LivingSocial and Groupon approached me, and then all of these other sites started approaching me.”
3. Are you loyal to a certain group buying site?
Brenner: “I’ve been very, very loyal to Groupon. As a small business owner, I don’t like if someone’s able to copy what I do. I spend a lot of time on the original idea and being an entrepreneur. And you know what, just opening something up and copying what someone else does, does not make you an entrepreneur. Doing something that’s creative and innovative and stepping outside of the box does. So, I really respect that Groupon did what they did. Maybe I’m wrong that they were the first one — maybe they were just the most popular one. And there are so many now, that everyone’s always trying to cut into what [other group buying sites] are doing.
“What I find really difficult is that the public doesn’t have loyalty to just one group buying site, and Groupon said, ‘Listen, we’re going to be really good to you. We want you to be a platinum member. We’ll run your deals a certain amount of times a year, if you don’t do the same thing with [other group buying sites].’ I wish I could say to [Groupon], ‘If I’m signing [a contract] with you, I’m a platinum member, and I’m going to be loyal, you have to do the same thing for me.’ I get approached a lot, and if I’m going to be waving their flag, I expect them to do the same thing for me. I don’t want them launching the same types of deals with my competitors. [The balance] isn’t where I’d like it to be, but [my Groupon contact] has kept her word to me and it’s not her choice.”
Mannino: “We’re really loyal to LivingSocial, because we like it and it’s been the best result for us. The way that they write their editorial speaks to our client, a person who’s a little more interested in hair. When we worked with BuyWithMe, they made some reference to A-Rod and bombshell blondes, and we were like, ‘What are you talking about? This doesn’t make any sense.’ The editorial was horrible for us. We got to review it, and we thought maybe that’s their audience. We went back and forth and cleaned it up as much as we could, but it failed in comparison to LivingSocial.
“What keeps us loyal to LivingSocial is that our rep comes in all the time, talks to us, asks us what’s happening with the hundreds of people that we get who sign up from LivingSocial when we run a deal. We’ve done three with them now, and it’s really successful. They listen to us and they implement things that we’ve told them. And what’s great about LivingSocial is that they’ve broken down into three different compartments [in Manhattan] — Uptown, Downtown and Midtown. So, we can do a Downtown deal, where the copy works for someone to come Uptown, whereas they might not before. It’s really smart to do it like that… In turn, LivingSocial just makes us not want to do any of the others ones, because we’re so busy from the return that we get with them, because it’s targeted, it’s smart, it’s the Upper East Side, and the copy is written well.”
Ortiz: “I’m loyal to Tippr. I did a deal with Groupon and it did really well for me, but at the end of the day, the quality of leads that I got were so much better with Tippr than I got with Groupon. And Tippr always gives me a phenomenal write-up — they talk about me as ‘the Fitness Demon,’ they use the videos from my YouTube page, and that builds up brand loyalty. They just do a great write-up that appeals to the market that I want to. Groupon made it seem too soft, but Tippr got the point across to the type of people I want to deal with. You know, ‘Get ready to be boxing. It’s not for those girly girls. We keep going rain or shine.’ That’s the type of market I appeal to.”
Baugh: “I feel loyal to Groupon. We did a LivingSocial deal, and we had a great experience with them and they were completely professional and very nice, but I just feel that, in part, it’s sentimental — we sort of started out together. Now, they make like a million dollars a minute and we’re just still trying to sell a cupcake. My contact at Groupon is a tough cookie, but she’s fierce and I feel loyalty from them as well.”
4. Do group buying sites devalue a brand’s image?
Reynolds: “That’s a really valid question, because it’s a coupon, it’s a really discounted experience — and you’re afraid that it’s going to discount the perceived value of your company, but there are different [pricing] tiers within all of our companies.”
Brenner: “In some ways, it’s hurting loyalty to a brand. They absolutely love what I do, but say [a company] who’s trying to copy me puts a deal on LivingSocial. For those who don’t want to spend the money on the full price [of my service], they can keep going from deal to deal to deal to deal.”
Ortiz: “For fitness business owners, only God knows how many fitness boot camps there are, especially in Manhattan — and we can get costly. At the same time, after the deal’s done, clients want the same deal. That’s the biggest issue. I don’t think I’m devaluing, but at the same time, you have to let them know that it’s a special, one-time deal. And I’m honest with them — I’m going to go broke if I do this deal every month. That’s why I’m honest… At the end of the day, it’s about their personal income. If they don’t have the money, there’s nothing you can do about it. There’s only so much you can bend. If you keep cutting prices, you devaluate. I have a thresh hold — everybody should have a price thresh hold.”
5. What types of customers do group buying sites send you?
Brenner: “There are a lot of positives, and there’s a certain negative — you’re getting different clientele. My clientele used to be, without a doubt, very professional with money to spend, and maybe a little older. And now I’m getting a lot more traffic, which I’m putting on more staff, which is wear-and-tear on the place and I’m spending more money on payroll. But I’m not getting the people that have the loyalty, because they’re getting a flavor for something so discounted that they’re like, ’she’ll do a deal. I know she’ll do another deal.’ ”
Mannino: “Because they’re loyal to the site, but there’s no loyalty that you’re building with a lot of these people.”
Ortiz: “I don’t know how they do it, but I just find that the quality of leads from Tippr are just so much better [than with other sites]. I just ran another Tippr deal last month, and I sold 102 deals on a one-month [membership] for $19, which wasn’t bad. I’ve already found that more than half of them stayed on, because as soon as I get them in there, I say, ‘Look. This is a one-time deal. The goal is that you can see the full value of this. And I’ll give you a Tippr special. I won’t give you the full $197 a month, but I’ll give you somewhere in-between, where at least you’ll see the full value of it, and I won’t go broke as a business owner.’ I find that up-front honesty works with them.”
Conniff: “One of the big problems with conversion is that [group buying sites] will tell you up front that they don’t want any deal that’s for anything less than 50% off. You’re in a position that you can’t give a small discount and get the kind of people who are going to continue to come back, paying full price. You’re going to get the people who can only afford it because it’s 50% off.”
Brenner: “The Groupon [clients] were coming in and didn’t have the same type of loyalty for the brand. When you come in and you sweat, and you’re killing yourself — it’s four days a week — it’s boot camp. And now you’re bringing in someone that doesn’t really have that team platoon dude-I’ll-throw-my-body-underneath-you spirit — they come in because they paid $80. It does something a little different to the brand, but then you’re also getting people who say, ‘I’ve never experienced this in my life, if I didn’t come in.’
“And for the people who don’t show up to class, they lose their class. And then, those are the people who are calling up saying, ‘I spent a fortune,’ and they’re actually upset, ‘I paid the Groupon.’ Even if you paid $1,000, and you don’t show up or call, it’s a rule — you lose your session. The problem is that the people who are going from coupon to coupon to coupon don’t understand the value of the business.”
Baugh: “We’ve done three deals with Groupon — the first was for half a dozen cupcakes at half price, the second was for a dozen at half price, and we just did a Groupon for cupcake baking classes. We sold 3,674 of those. We had spent months setting up the website to get it as automated as we could have it, so they could just go online and book their class. Now, we’re starting to see that they’re not showing up for class. They’ve bought it, paid for it and signed up online — we have all their information, and then, we had a half-full class. It’s hard to say what kind of customer that is.
“For us, on the one hand, we accomplished our goal; we got the money, even though it’s a portion of what we’d get from a full-paying customer. But I kind of chalk that expense up to the fact that I don’t have another way to reach half a million people, or however many Groupon is reaching. So, just the value of getting our name out in front of those people is huge to us. So, that’s a marketing budget.
“A lot of times, we see people who love food — they’re all over the food thing — they’re all ages really, and I’d say the majority are probably 30s and under, who are probably more likely to use group buying sites. But, in a way, it doesn’t matter to us, because they come in and get the cupcake, and hopefully they love it and they tell their friends. They can be any kind of person they want to be. We don’t care as long as they love the cupcakes and tell everybody.”
Siegel: “You get a younger person who’s slightly less interested in your brand and more interested in the deal or the next time they can attain the deal.”
Reynolds: “I think it’s human nature that everybody likes a deal, whether it’s the NYU college student or the Goldman Sachs executive. Granted, there aren’t as many Goldman Sachs Groupon and LivingSocial buyers, but they’re out there, and they will buy a deal every now and then. For us, for corporate events, for example, that’s huge if you can get that 1% to buy it.”
6. Any advice for small businesses looking to try group buying site?
Baugh: “Prepare your staff. As long as you’re prepared for the first couple of days after you run your deal, and you have extra staff and ingredients and you’re ready, your quality is not going to suffer, because you’re prepared for that onslaught. And then, [traffic] totally drops after that to a normal day.”
Mannino: “Research what you would buy and make it worth it.”
Reynolds: “Yeah, I think your choice of the product or service that’s offered on the deal is critical. So, it’s gotta be something that will appeal to the target that you want.”
Ortiz: “Have a strong conversion system to convert them into higher paying clients.”
Conniff: “When it comes to rolling with the punches, it’s true that these things are out there and you have to stay current, but don’t think that means you have to do everything. Sit down and figure out what works for your business — whether it’s Foursquare or group buying or whatever it is, if it doesn’t work with your model and your image, don’t do it.”
Brenner: “Find the person and site you want to have a relationship with and ask questions. If you don’t ask questions — not that they’re trying to withhold information from you — they may not be giving you information that you feel would be critical. Do your research and ask a lot of questions.”
“And also, once your deal is on, make sure you have somebody — whether it’s your marketing person or the owner — sitting on the [deal’s] chat board, monitoring the entire correspondence that day. That day, that is that person’s job — to be able to sit and field questions in a real-time fashion, because that is going to make or break you on how that deal goes throughout the day.”
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