Last Wednesday, 3/21/12, THINK put on an audio conference for the Association of Strategic Marketing on group buying sites. Group buying services, like Groupon and Living Social, have been on our radar for a while now and we wrote a series of three posts about the space a year ago.

The talk included an overview of the group buying landscape and several of the key players and revenue models being used. It also covered the key factors that have driven adoption and continued use of group buying services from the consumer’s viewpoint.

Groupon Cupcake Offer. Image credit to Uptown Update.

The main portion of the audio conference was walking through an approach that marketers and merchants can use to determine whether running a group buying offer is a good decision. The approach centers around calculating the net deal cost, a process we’ve outlined in detail in this blog post. The highlight of the decision-making portion of the talk was a break-down of a Groupon deal that, seemingly, went bad for the merchant – a UK bakery’s cupcake calamity.

Looking at the cupcake case, determining whether using a group buying offer was a smart marketing decision depended on how many repeat customers the Groupon campaign generated. This is not a unique factor to the cupcake world. Whether group buying deals attract quality, repeat customers is often the key issue in determining the profitability of a deal, as well as determining whether a merchant will try a group buying offer again. According to a white paper released by ForeSee earlier this month, 44% of offer redeemers had already done business with the company again, and another 47% planned to buy again. These levels of repeat purchase and intent are the highest I have seen reported to date. This is not only good news for the cupcake bakery, but for the group buying service category as a whole.

For further reading on the topic, check out Foresee’s Daily Deal Commentary (2012) published earlier this month. Forrester’s Myths and Truths About Daily Deals, published in November 2011, is also informative.

If you’d like to talk about group buying services, or any other form of digital marketing, please feel free to reach out to us. We’d love to hear from you.