As a way to compete, many of these smaller many of these smaller companies springing up are offering a cheaper alternative to the established group buyers. Some take 10% from the deal as opposed to the larger percentage that the established group buyers generally require.
Joint-CEO of Groupon SA, Daniel Guasco, commented on the lower pricing, saying that: “what many seem to forget is the huge amount we invest in our vendors. Groupon is currently the 22nd biggest site in SA after only being in the country for 6 months. Of the 50 percent commission we take; the majority is put straight back into advertising the deals to ensure they reach the ears and eyes of more customers, as well as towards other considerations, such as increasing our staff capacity to assist the vendors.
The commission ultimately enables us to invest a huge amount back into marketing our vendors deals and giving our vendors and customers as much assistance as possible. For many copy cat companies, their 10 percent goes straight into their pockets with no consideration for their vendors.”
The myriad of copy cat businesses also argue that having a smaller consumer base (most of them have much smaller customer database than the likes of Groupon) benefits the retailer because they will deliver smaller amounts of customers, which can be better serviced by the merchant. But, Guasco counters that the benefit to retailers of participating in group buying is precisely because it has the potential to deliver significant numbers of new customers.
“People often do not consider that; even without the deals themselves – quite possibly the best thing that we do is in fact give retailers access to our extensive database. Groupon literally accelerates the growth of the businesses who partake in our offerings,” said joint CEO of Groupon SA, Wayne Gosling.
Sandwich Baron is a case in point. “Groupon explained the impact the campaign would have far better than their competitors, who also approached us. Generating new traffic into our stores was very appealing to us, and this has been the result. There has also been a dramatic increase in hits on our website because of the deal,” said Sandwich Baron franchisor Sally JÁrlette-Joy.
“You have these smaller
group buying companies telling retailers that it is better to gain a few customers and not “flood the market”; which is really a bit mental when one thinks about it. Groupon is a marketing activity, and compared to traditional media it is the most cost effective and risk free form of marketing available. Groupon gets “feet in the door”; not the promise of customers as many other forms of marketing do. If, for example a vendor was to take a print advertisement you hand over a large sum of money and can only hope that it pays off. I am really proud that we are not like that, we offer total measurability,” said Guasco.
Gosling added “In the end it is up to you as the merchant whether or not you can handle the service; we put you in the limelight in front of a large amount of new customers - one of the most powerful things about Groupon is this database of ours is completely organic – all our customers are opt-in’s – what this means is you get exposed to our entire database but only pay commission on the actual customers we acquire
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