Group buying: A good marketing tool?

Small business marketing strategyIf you’re planning a small business marketing strategy that includes signing up for Groupon, LivingSocial, or one of the roughly 500 other social buying plans, you may want to think more about it.

According to an article on ClickZ,  Utpal Dholakia, a management professor at Rice University’s Jesse H. Jones Graduate School of Business, has found that only 20% of people who use such deep-discount coupons ever return to pay full price.

Here are some other key findings of Dholakia’s study:

  • 36% of deal users spend more than the voucher value when visiting a merchant.
  • 22% never redeem the vouchers they’ve bought.
  • 56% of businesses reported making money on their promotions, 27% lost money, and 18% broke even.
  • 48% of all businesses planned to run another daily deal promotion, 20% said they would not, and 32% weren’t sure.

How might you do? It depends on the type of business you own, the study found:

Roughly 70% of marketers in special events, health, and services reported making money on their promotions. Conversely, only 44% of surveyed restaurants were as fortunate.

Perhaps most telling, only 36% of restaurants/bars and 42% of salons/spas that had run such promotions said they would do it again.

To read the study summary, click here.

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