Social Buying: Making Coupon Clipping Cool Again

What if we could leverage our collective buying power to bully and negotiate pricing in the way that Walmart does? Sounds like the beginning of an infomercial for www.directbuy.com, but the truth of the matter is, this has become a flash mob reality in some Asian countries. Consumers are using digital media to organize themselves and then descend upon a retailer en masse, demanding discounts. I don’t know if the economics actually work (15 people showing up at Best Buy demanding a discount on a digital camera vs Walmart negotiating on purchasing 20,000 cameras) but regardless, the concept has caught on and marketers are running with it.

The concept is called “Social Buying” or “Offertizing” and there are several new internet startups anxious to facilitate the transaction (Groupon, Homerun, etc.)

Coupon Codependence
Big brands often fear offer driven advertising because they’ve seen what it does to brands like Bed Bath & Beyond where consumers only shop when they have a coupon. But many smaller brands (the kinds of brands that do well on sites like Yelp.com) have embraced offertizing as a way to steal market share and create a following while they establish their brand.



Coupons are Cool?

That’s right, coupons infused with social media and legitimized by a peer group have taken couponers from “penny pinching misers” to “digital savvy shoppers.” Because most sites like Groupon offer deals based on a minimum number of people participating, users often end up reaching out to their social groups.  This digital WOM (word of mouth) creates social validation and peer pressure.  So next time your mom says “If all your friends were jumping off a cliff would you do it too?”,  you might have to ask some clarifying questions before answering: “That depends, is there a bungee cord tied to my ankles and am I getting 50% of my first jump?”

Donald Trump even showed his support when he sided with the coupon clipping wife on the Marriage Ref.

10% Off = Boring

Gone are the days when 10% off coupons are going to raise people’s heart rate.  Admittedly, the extreme 50-80% off deals seen on Groupon are not likely a viable long term play, but businesses should consider this option in terms of volume selling, inventory liquidations, net new customer acquisition and as loss leader.  One strategy might be to replace frequent small promotions (that create a coupon dependency) with a few BIG promotions.  Also remember that if the redemption of social coupons is anything like gift cards, as many as 20% will buy, but never redeem, resulting in revenue without any corresponding expense.

Pay to Buy

In traditional brand building advertising, marketers pay to have their brands exposed for a few passive seconds. Traditional coupons are so commonplace that we freely give them away, thus insinuating that they have little to no value.  Contrastingly, most social coupons are purchased, which results in serious consideration and research prior to purchasing.  During this research and consideration phase, advertisers have the opportunity to indoctrinate an engaged set of prospective customers on their unique features, benefits and key differentiators.  Think about it: an engaged consumer willingly reading your brand’s propaganda and then paying money to have the honor of being your customer… sounds like a no-brainer.

Reality Check

The reality is that some of the people that take advantage of these extreme social coupons are already customers and are now just getting a discount on things they would have paid full price for.  Some consumers will get a distorted view of price and have a hard time transitioning to full price.  Some businesses will underestimate the demand created by these programs and overestimate the LTV of new customer acquisitions.  But for each of these there will surely be others that will take calculated risks, resulting in relevant new local customers that come in for a deal, but return after drinking the Kool-Aid.

So what do you think, will Social Buying work for larger retailers and chain restaurants?  Do you think brands using Offertizing are seeing a return on their investment?

Tagged as: advertising, Bed Bath & Beyond, Best Buy, Business, Collective buying power, Coupon, groupon, Marketing and Advertising, offertizing, online coupons, social buying, yelp, Yelp Inc.