The Asian food kiosks at most Sydney shopping centres run a fire sale an hour before closing time. They pre-package the leftovers, halve the price and advertise heavily to let customers know that everything must go. And almost everything does. At the end of the day, most of the food is sold.
The margins in the service industry are good to sustain this daily discounting. The fire sale also brings in new customers and there is repeat business in profitably moving old stock and starting with fresh ingredients the next day.
The ingredients of group buying websites are very much the same. The sale is time bound, the marketing is centred around discounting. The only difference is that the model is based on a group buy - getting a minimum number of people to eventuate the discount which is atleast 50% of the recommended retail price.
The group buying process is quite straight forward.
The group buying provider signs an agreement with a vendor, a service provider or a product manufacturer. The agreement is to buy a certain number of product at 25% to 40% of the recommended retail price (RRP). These products/services will be sold on a particular day or over a number of days. An email will be sent out to a registered member base via email prior to the sale period. The sale price will be at atleast 50% of the RRP. The group buying service provider will pay the vendor once the sale period ends. All unsold items is returned to the vendor.
Popular group buying websites here are Cudo, Spreets, Living Social and Scoopon. The model is based on the US based Groupon, which has also recently opened operations here. Although member numbers of these websites are not audited, they all claim to have anywhere between 100,000 to 400,000 registered members and there are member overlap across multiple websites.
Key service provided by the group buying website is marketing, in promoting the marketed products through landing pages, attractive copy and an email newsletter sent to members. The uniqueness of the offers lie in the hands of the business development person at the group buying service, who sources for partnerships.
The margins required for vendors to participate in customer group buying make it suitable for services such as therapies and dining. With a minimum 50% discounting and fees paid out to the group buying operators, profits for vendors through group buying are aquite thin or non-existent. Product manufacturers should consider online discounters such as Ozsale for pushing discounted items - such as end of life or overstocked items.
Even services who offer group buying vouchers need to consider yield management and protection of brand equity to balance discounting over the popular and lean periods. If this is not managed, bad customer experience by having customers with discount vouchers arrive at overbooked venues will backfire.
Group buying is one of the channels to be considered in an overall marketing plan. It certainly is attractive. It could be used strategically for yield management or as a sampling exercise for attracting new customers.
The margins in the service industry are good to sustain this daily discounting. The fire sale also brings in new customers and there is repeat business in profitably moving old stock and starting with fresh ingredients the next day.
The ingredients of group buying websites are very much the same. The sale is time bound, the marketing is centred around discounting. The only difference is that the model is based on a group buy - getting a minimum number of people to eventuate the discount which is atleast 50% of the recommended retail price.
The group buying process is quite straight forward.
The group buying provider signs an agreement with a vendor, a service provider or a product manufacturer. The agreement is to buy a certain number of product at 25% to 40% of the recommended retail price (RRP). These products/services will be sold on a particular day or over a number of days. An email will be sent out to a registered member base via email prior to the sale period. The sale price will be at atleast 50% of the RRP. The group buying service provider will pay the vendor once the sale period ends. All unsold items is returned to the vendor.
Popular group buying websites here are Cudo, Spreets, Living Social and Scoopon. The model is based on the US based Groupon, which has also recently opened operations here. Although member numbers of these websites are not audited, they all claim to have anywhere between 100,000 to 400,000 registered members and there are member overlap across multiple websites.
Key service provided by the group buying website is marketing, in promoting the marketed products through landing pages, attractive copy and an email newsletter sent to members. The uniqueness of the offers lie in the hands of the business development person at the group buying service, who sources for partnerships.
The margins required for vendors to participate in customer group buying make it suitable for services such as therapies and dining. With a minimum 50% discounting and fees paid out to the group buying operators, profits for vendors through group buying are aquite thin or non-existent. Product manufacturers should consider online discounters such as Ozsale for pushing discounted items - such as end of life or overstocked items.
Even services who offer group buying vouchers need to consider yield management and protection of brand equity to balance discounting over the popular and lean periods. If this is not managed, bad customer experience by having customers with discount vouchers arrive at overbooked venues will backfire.
Group buying is one of the channels to be considered in an overall marketing plan. It certainly is attractive. It could be used strategically for yield management or as a sampling exercise for attracting new customers.
