Spreets, Cudo, Groupon, Jump on it… this isn’t just X generation online slang, it’s a serious business opportunity every business owner in Australia should familiarise themselves with. These massive online communities offer deals, via a unique business model called ‘Group Buying’, and are growing in strength and popularity in Australia at a rapid rate.

How does this ‘Group Buying’ phenomenon work?

People subscribe to these services and are sent a daily email with a deal. The deal is ‘open’ for a certain period of time (say 24 hours). If someone is interested they ‘buy’ the deal, but the deal is only activated when a certain number of people ‘buy’. The target is usually between 20 and 100 people, depending on the deal and its value. When the open period ends, the person’s credit card is charged and they are emailed the voucher for their deal. The buyer can also promote the ‘deal’ to their friends and networks via email, facebook and twitter.

Deals include things such as discounted beauty treatments, dining packages, accommodation packages, retail offers, wine packages and more.

The biggest players in this market are:

Primarily they offer ‘deals’ in metropolitan areas, but they are expanding into regional centres rapidly.

A recent study by Telstyle predicts this industry to grow by 284% in 2011. 284%!!

How can businesses take advantage of this market place? These websites have absolutely thousands of subscribers, and can generate hundreds of new customers to your business in the matter of a few hours. It costs nothing to list your ‘deal’, but the site takes a commission from your earnings (for example Cudo takes 50%).

Does it really work? Let’s have a look at an example. A recent deal on Spreets of a 2 course dinner for $49 at Portorosa Italian Restaurant in Perth (worth $130) sold to 234 people. That’s 234 new customers to the restaurant for $5733 (at 50% commission). That’s cheaper than most other advertising options, and it’s an expense that is taken direct from the promotion’s earnings.

BUT, a few cautionary notes before you begin. You need to offer a good deal for this to really work. I’m talking a mega discount, or an awesome value package. This can affect your profitability, your branding, and your positioning so be careful what you offer and make sure it doesn’t damage your business. Also, be wary of HUGE demand from a deal, which can affect your availability to service regular customers (who haven’t come to you from a special deal or promotion). Be careful to put limits on your offer and consider how to manage the onflow of business. And finally, find ways to keep the clients that come to you due to your special deal. Subscribe them to a database and continue to promote to them. Enter them in a competition. Offer them a 12 month package. Anything! These customers are often seeking a good deal and a good deal only. Find a way to keep them loyal.

If you’ve just opened and need to build awareness; need to stimulate sales INSTANTLY in a slow period; need to clear out some old stock; need to kick-start a new product; or a cheap way to launch something new, this is the way to go. If you’re a regionally based business, it is also a great and affordable way to attract metropolitan business (at least until the phenomenon spreads into regional areas).

Stuck? Unsure? Confused? Contact me, I’m here to help.