Tuesday, January 10, 2012

Some Considerations of Promoting Business on Group-Buying Websites

Many consumers use group-buying websites like LivingSocial and Groupon to find deals nowadays. Certainly, these websites can help business draw traffic and bring in new customers, but I must say that promoting business on group-buying websites is NOT for everyone, regardless how effective this distribution channel may appear.

Why? --- That’s a great question. First, please allow me to share four examples of mine during my recent visit to San Francisco:

Example 1: City Segway Tours. The company promoted a 3-hour Segway tour at LivingSocial.com (50% off). The tour was fun, but the weather was foggy (fog is normal in San Francisco, right?). Because of the fog, the tour guy asked us if we would prefer to skip the Golden Gate Bridge and spend more time in the Palace of Fine Arts. Then, she added --- I hope you guys won’t post a negative comment online because of this, stating that “this tour sucks as we did not spend time observing the Golden Gate Bridge.” It turned out that we could barely see the water when we were near the bridge.

Example 2: San Francisco Whale Tours. I purchased the 1.5 hour San Francisco Coast and Tributaries Eco Tour at Groupon.com (50% off). It was a great and enjoyable experience. I posted some pictures and said good things about the Segway tour and the eco tour on Facebook. Some friends asked me for more details of the tours after they saw my pictures. I highly recommend these two tours to my friends based on my positive experience.

Example 3: The Imperial Palace Restaurant. I purchased a half-priced voucher for a dim sum platter at Groupon.com, without paying attention to the “fine prints” --- I could only redeem this voucher after 5 pm, but as a Cantonese, I do not eat dim sum at dinner time. Since I have purchased it, however, I would use it anyway. The dim sum was poorly made and tasted way below-average. I was planning to order additional dishes but decided not to do so after trying the dim sum. In the end, the restaurant charged me $2 per person for the tea, which usually costs nothing or up to $1 per person in the restaurants in Chinatown. Afterwards, I wrote a negative review on Google about this establishment. My friend, who is a Chinese immigrant living in San Francisco, also told me that she would tell her friends to stay away from this restaurant. Most of all, she would never come back to eat in this restaurant again.

Example 4: House of Dumpling in Union City, CA. I did not have any coupons or vouchers for this restaurant. My American friend took me there because he read some very good reviews of this establishment on Yelp.com and wanted me to try it. It was a small and nice place. Actually, I also got a chance to speak with the owner regarding the restaurant’s online reputation. She was very proud of her business, saying “we do not do any advertisements or promotions online or offline. Yet, people review their experience. We are running a small but very busy business. People are lining up for our dumplings and (as a result,) we do not want to actively promote our business. Otherwise, we cannot handle the crowd --- everything here is made from scratch.” Even though I disagree with most online reviews on Yelp.com about one thing --- this is not a real dim sum place (Cantonese food), but it is a nice place for “Chinese breads” and dumplings that are often found in Northern China. Regardless, because of its good food and good service, I recommended this restaurant to my Cantonese friends who live in the Bay Area.

From these four examples, we can tell that social media can manifest the Word-of-Mouth (WOM) effect in a large extent. In particular, a business or a group-buying website may want to consider the following:

  • WOM effect is a double-edged sword. If a business fails to deliver good service and high-quality products, the negative WOM effect could be detrimental. Accordingly, businesses must feel certain that they can create positive WOM effect before promoting their businesses online.
  • Businesses must understand their capability before making a sales and marketing effort online.
  • It does not matter if a business chooses to actively engage in social networking sites or not, people are talking about it anyway. One has no other choice but to manage his/her social media presence (it works in the individual and macro-organizational level).
  • A company’ online reputation can be very quickly created or ruined by group-buying websites. Chances are those users who use LivingSocial and Groupons also love to talk about their experience on Facebook, Twitter, blogs, and other social networking sites. It becomes critical for businesses to pay close attention to these tech-savvy customers and address their needs.
  • Group-buying websites can help business to target the “right customers” by tracking users’ purchasing history, preference, and feedback. For example, recommendations of BBQ restaurants can be made to User A if s/he ate in a similar establishment before and liked the BBQ there.
  • Group-buying websites need to find ways to help companies develop business strategies of attracting repeat customers. It is good that group-buying websites can help businesses create a positive online reputation and draw traffic, but companies also want repeat customers. Accordingly, it is important to find out: Who will come back and who will not? What makes a customer come back even without a voucher or coupon.

What do you see from the four cases presented above? In your opinions, what needs to be considered before making a promotion on social media?


References:
The picture was downloaded from TheLunchBreakBlogger.com.