Group Buying Economics: Customer Service Is The Way To Win Groupon.

18 months ago, Groupon was still.

Bonderman's view is basically that the value of Groupon lies in its business mode. Since entry barriers are basically zero, this mode is of no value.

But I don't think so.

Groupon has obvious network effect: the more registered users Groupon is, the more accurate the order paction is.

Besides, the success of Groupon also has its social factors.

But first of all, it is worth looking at the name of the company.

Then we will take a look at the "coupon" part of the company name.

Merchants do not have to spend money distributing coupons in local newspapers.

On the contrary, they can earn half of their total income.

Is it not only a pleasure to sell coupons to new users, but also to make money?

But Groupon is more than just "regiment" and "coupon".

Groupon tailor business to merchants, take Groupon's largest market restaurant.

(OpenTable) one of the reasons why stocks are so high is that it is expected to get a place in the group buying market, because it has the advantage that Groupon does not have: getting the target users based on the history of diners' past dining history.

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Perhaps the most important aspect of Groupon restaurant business is its localization properties.

Before Groupon, businesses were unable to get local consumers' information and shut out other customers.

If you are a community restaurant, you don't want to attract too distant customers, you want to aim at local customers.

Groupon has not yet done that, but it is more effective than any previous model in finding target customers, and Groupon is developing every day.

Besides, cooperation with Groupon can bring many benefits to restaurants or other businesses.

For example, the product information is provided to the precise crowd nearby, that is to say, even if not many people sign the bill, the merchant can still see the customized advertisement, and comes from the trustworthy Groupon.

And if a few hundred people make a deal, you can get a lot of "psychological share (mindshare, relative to market share, marketshare)".

Many people will immediately change coupons, but there are many people who will wait for a while to keep them in mind.

If a friend asks if he has a good restaurant to recommend, they will probably remember your name, even if they haven't been there.

When they really go to your store, they will know how your storefront and services are, and the information is difficult to disseminate through broadcasting channels.

Of course, from a broader perspective, group buying encourages people to get rid of their daily habits and start experimenting with new things.

Many people may have a new idea after seeing a newly opened shop; Groupon can turn this vague idea into something we must do, because we do not want to waste the money spent on Groupon.

By forcing people to buy products on Groupon, restaurants can lock in new diners, which is never done by traditional coupons.

In this sense, group buying is a promise tool for customers: it will force you to do what you really want to try, but you may never have the chance to try.

Businesses offer short pactions, usually only one or two days, to persuade customers to make commitments now.

Customers understand that if they do not buy them now, they will miss the opportunity.

Group buying website is very good at bringing in traffic in the off-season, Will Sanders from Giorgio 's of Gramercy restaurant said Groupon could set off a business climax in the off-season months after the holiday.

For any business that needs to maintain its business through passenger traffic in the off-season, group buying websites are the best choice.

Group buying websites are very discounted, but businesses still have profits.

Indeed, a survey conducted by Utpal Dholakia of Rice University shows that 66% of businesses offering group purchase orders can earn profits and are not yet new customers of repeat customers.

For example, in the Giorgio restaurant, customers spend $15 on group buying products and get $30 worth of food.

But if two people eat, plus a little wine, consumption can easily reach or even exceed 100 dollars.

So even if you remove $22.5 from the bill ($7.50 to Groupon), restaurants usually earn money.

According to a survey by Groupon, it is no coincidence that the customers who join the gourmet group purchase will exceed the group buying price by 80%. This is no coincidence that the value of group buying is to calculate carefully and ensure that diners will consume more on the basis of group buying products.

However, if the product is miscalculated, the consequences may be very tragic: if your product buys 40 dollars and the group purchase price is 20 dollars, then you will probably lose a lot of money soon.

On the other hand, if the average price of your product is 100 dollars, you can make money every time you cash it.

But does this mean that from a consumer perspective, we should only take part in those "just good" group purchases, and not spend more on them? This is certainly the best way to save money, but do you find it interesting?

In other words, if you spend a lot of money on group buying, the result is very bad, no matter how little money is spent, it is not cost-effective.

On the other hand, if Groupon helps you find a gym nearby, then you become a frequent visitor, that's the real value of Groupon, no matter how much money you spend the first time.

If you are already a regular customer of a business, you will often join the group buying.

Restaurants don't want to give you any discount: all restaurant owners try their best to please regular customers.

But if you don't know what you can buy, the risk will be even greater, and it's not just that you don't like a meal.

It's also possible that you go to a restaurant full of new customers holding coupons, so it may be a good choice to wait for a few weeks to change your group coupons.

But on the other hand, group buying products may expire before they are used, because you always want to exchange, but never go.

This not only wastes your own money, but also does the restaurant have the opportunity to show you their delicious food.

The only real winner is the group buying website itself.

Group buying websites are especially attractive to restaurants because they have high fixed costs and can only be profitable when they have enough traffic.

In contrast, it is less attractive to other types of businesses: for example, you are a bookseller, customers only buy books once, Bestsellers do not earn money, and then start ordering books from Amazon.

On the other hand, group buying is not applicable to all restaurants.

There is a reputation problem. Sanders says there is a problem for Daniel restaurants. For them, Giorgio is a community restaurant, so group buying is very effective.

Another important social factor is the success of Groupon.

For all digital marketers who love to talk about viral social media marketing, social media is the most important tool if companies want to win by quality rather than hype.

Social media is to turn word-of-mouth into an extremely powerful marketing tool.

And the best way to get word of mouth is to provide first-class services.

Social media is a natural beauty for small companies and big companies that are good at doing things but not good at marketing.

As for group buying, the quality and conservation of Groupon and its cottage websites are very important.

(for businesses, one of the disadvantages of launching a group buying website is that shopkeepers will inevitably be influenced by the Shanzhai group buying websites and try to sell the same services.

Groupon CEO Andrew Mason attributed the success of the company to the executive power of Groupon - making customers and businesses satisfied at the same time, rather than the creativity of genius.

Groupon says more than 95% of businesses will start buying again, or recommend Groupon to their peers.

Keeping such a high figure is not simple: companies need to provide a lot of valuable suggestions to businesses, such as pricing, how to set the maximum / minimum sales volume, and how to avoid large numbers of bargain hunting people.

These things are easy to mess up. If Groupon and other group buying websites can achieve long-term success, it is because they put a lot of energy into customer service rather than just calling four sales together and giving them commission.

Such companies will be killed by social media word of mouth machines.

The idea of group buying website is that it can attract new customers to restaurants, some will become regular customers, and restaurants will make profits.

In this mode, long-term profits come from a small number of customers, so as to compensate for the short-term losses caused by the "one shot sale" customers.

This is indeed the core concept of Groupon, which is not only the business revenue.

From this perspective, restaurants are also like Groupon.

Groupon can make money in every paction, but it can earn a lot of money only when businesses often patronize.

In this way, the cost of launching and selling the group purchase products will be greatly reduced, and the profits of the Groupon will increase greatly.

Groupon, like its businesses, relies on repeat customers.

And this depends on good word of mouth, like wildfires, burning on social networks such as Facebook.