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What we can learn from collective buying...

Advertising and Promotion

Collective buying is becoming an increasingly popular way to purchase products and services at a promotional discounted price.

The origin of this type of buying is built on the principle of social capital and how this type of structure is firstly very competitive and secondly, provides a measurable tool for estimating ROI.

“In addition, the customers that have partaken in the marketing offerings will come in and experience that business on a personal level,” adds Dan Palay, Joint CEO of – South Africa’s largest social buying website in terms of deals conducted and its online audience.

Dan explains that the social buying trend started in early 2009 with sites like “Woot” and “The Point” (the predecessor to Groupon). Towards the middle of 2009, the trend started to really take off in the US with Groupon due to the timing of the economic downturn along with huge social networking penetration.

“We know that with most type of marketing, especially with ATL marketing, it’s difficult to measure ROI. With social buying, the ROI is transparent and is received very quickly – sometimes in one day on pure daily deal sites,” says Dan.

So, how does it work?
With social buying, a minimum number of purchases are required in order for a promotion to be activated. This promotes sharing of deals via social networks.

This type of sharing has enormous viral marketing benefits beyond those where a deal is purchased. Dan mentions how some social buying sites (like Wicount) pay the business’ share of the revenue “upfront” (as soon as the deal is finished). In some cases, this can be a huge cash injection to a business. In a couple of cases, we’ve had businesses open up additional branches with the extra cash that helped accommodate the huge influx of customers.

How must does it cost?
There is no up-front cost. A marketing fee is taken on a percentage basis should the promotion go beyond the minimum required.

How does my business qualify?
In order for a business to qualify for becoming a partner, certain criteria have to be met. This type of promotion works particularly well for service-based lifestyle businesses that typically work within margin ranges that enable them to provide huge discounts such as spas, restaurants,  entertainment providers and any service oriented business. Location, brand and reputation are key.

Dan further adds that it’s also important that those involved in the business understand the value of marketing via social buying and that every new customer that walks through your door as a result of the social buying promotion should be treated like “gold” so that they’ll come back again, tell all their friends and family and in this way create positive word of mouth and recognition. It definitely helps if the business has a website and is involved in social networking already. As a guideline, businesses are encouraged to not feature promotions for less than 40%.

What happens if a minimum number of sales aren’t reached?

Dan comments on how if the minimum isn’t reached, all of the marketing created by Wicount around the promotion is free of charge to the business.

Also, those that purchased the deal are not charged – until a deal “tips” the funds are simply reserved on their credit card. This reservation will fall away and the credit card will not be charged.

A prospective business interested in offering a special deal needs to be aware of their location, business type and whether it would be suitable for this type of marketing, the popularity of the type of deal being offered and the level of discount.

The Power of Social Buying as a Business Tool
A variety of demographic information can be collected about subscribers and purchasers via surveying and reward incentives. Wicount can track purchasing patterns according to a variety of criteria that is already enabling them to use more pinpointed marketing techniques and segmentation based on the information gathered.

Dan advises that once a member is converted to a purchaser and experiences printing out the Wicount voucher, presenting it to the business and seeing that it actually works results in an extremely high rate of repeat purchases.

It’s a marketing expense that delivers real paying customers that will be interested in your business. If the business does its job and gives a first time customer a great experience, they will return and will be willing to pay retail rates in future as well as share their positive stories with their friends.

Dan also recommends that it’s a good idea to promote your products so that they correlate with certain holidays or seasons. For example, flowers will sell well right before Valentine’s Day and kids and family activities sell well right before or during school holidays.

“Social buying is proving itself to be very compelling from a business and marketing standpoint,” comments Aaron Toys, joint CEO of Wicount, “It resonates with people by not only encouraging them to make a quick purchase, but also by using their online social networks to share great offers with their friends.

It is a simple way for all businesses to drive new customer acquisition and increase the awareness of their brand.

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For advertising queries, please contact Jason Whitehouse directly – or call 082 903 6129/ 021 556 7493
For all editorial contributions/submissions, please contact Lidia Paly – or call 072 72 590 49 / 021 556 7493

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