A little while ago I wrote a post explaining a test I am conducting regarding advertising WASP Bags to more general audiences rather than surfing specific ones â€“ you can click here to see that post. The first step in this test was to get a WASP Bags offer on a few group buying sites to see how they go.
Results and learnings from that test will come soon. In the interim, I thought Iâ€™d share what Iâ€™ve learnt about how group buying sites work and how they work for advertisers.
What are group buying sites?
Â Group buying sites are those that offer heavily discounted deals to members once a certain number of members buy the deal. Groupon is the most famous worldwide (particularly after turning down a $ 6 billion offer from Google!); JumpOnIt, Cudo and Spreets are the largest in Australia (perhaps due to their TV advertising). These sites have exploded in the last 12 months with huge increases in people signing up, and more and more of these sites being created. This chart (thanks Mumbrella) shows how huge the category growth has been â€“ check out the vertical axis â€“ Cudo claims to have over 800,000 unique members!
Â How group buying sites work
Group buying sites basically sell vouchers. Thatâ€™s all they do. They work with the supplier, WASP Bags for example, to come up with a deal, and they then offer that deal to their members as a voucher which they buy from the site. They take a commission on the sale of this voucher (between 25% and 30%) and pass the rest onto the supplier. Customers then redeem the vouchers directly with the supplier.
To provide a real life example, WASP Bags has had an offer available to Scoopon members (click here to check out the offer that ran in Perth). Scoopon promoted the offer through their website; their members then bought the vouchers through the Scoopon website. Scoopon then passed the money paid (minus commission) to me, along with all the voucher codes. I upload the voucher codes into the WASP Bags store back end, the Scoopon members then go to the WASP Bags website to redeem the voucher, and in the process become a WASP Bags customer.
Whatâ€™s a good deal?
Group buying sites require an offer that is at least 50% off, and unique to their site (which makes it hard if youâ€™re looking to provide offers to multiple sites). When you factor in their commission of 30% on top of that, youâ€™re quickly offering 65% off your normal prices. So you need to have the margins to sustain this sort of a discount – unless youâ€™re willing to make a loss on this transaction to get new customers who you could turn profitable with future transactions.
Plus, all group buying sites Iâ€™ve spoken to have said that including postage in the offer is mandatory. Offers where postage is an additional cost on top, just donâ€™t perform as well â€“ and as these sites only get paid with each voucher they sell, they want to sell as many as possible.
So for group buying sites to run an offer, you need to provide at least 50% off, and include postage depending on what you have to offer. It also helps if your product/service is somewhat unique or otherwise of interest to their members.
Why advertise on group buying sites?
With such significant discounts and somewhat substantial commissions, you donâ€™t run offers on these sites to make a profit. You do it to get customers at either no, or very low cost. This becomes profitable when these new customers either purchase something else from you, or tell others about you business who in turn make purchases from you. You also get a big boost in awareness, plus website traffic.
Iâ€™ll follow up this post with an overview on the benefits and otherwise Iâ€™ve received through providing a WASP Bag offer on group buying sites. This post will provide a more detailed answer on why advertise on group buying sites. Sign up to 7YTFF so you donâ€™t miss it!