We all heard the news this week from Google confirming the launch of Google Offers – likely to be the biggest Groupon clone of them all. Google is planning to work with businesses on promotional deals and email a new offer daily to customers. With Google Places they do have have a substantial list of businesses and they also have another list of consumers, but just how big of a deal is this and should other group buying companies be worried?
Not every small business is appropriate for a group buying deal
The deals promotion business is a balancing act between what consumers will react to and what merchants want to sell. If a consumer sees a deal they are not interested in on a regular basis they will unsubscribe and the group buying site loses that customer forever, and maybe some of their friends. Group buying works well for companies in the service industry like restaurants, activites, spas and salons, and also for some kinds of products, but there are also some exceptions that don’t work so well. Very niche services with limited appeal don’t work and neither do locations that are too far out of the range of the subscriber’s zip code (depending on the city). Generally consumers will not drive for several miles or even hours to find your business. Often times merchants don’t know if their business will work for a group buying promotion so it is up to the site to do some sort of curation to determine a fit. If Google is going to let businesses to list their own deals then I wonder if they are going to have someone at Google actually approve the deals or if anything can be considered a deal.
There are two types of group buying sites
It is very easy to talk about group buying as one entity but how sites operate in this model is vastly different. Groupon’s model works, and appeals to the average consumer looking to save money. They have thousands of businesses backed up that want to advertise with them in every city. With a business of that scale they have little time to hunt down the gems; they have a formula and it works. If the merchant’s deal needs to fit into that formula, it is approved and then they are on to the next deal. Other sites hunt for deals, and have consumer and deal matching down to a “deal science” to find specific types of deals based on what they know their audience will like, or based on what they have purchased in the past. Groupon is trying to do this with deal personalization but I have yet to see them send me a deal that I would buy. Deal sites that spend time curating deals do it because they want an ongoing relationship with the consumer and they know there is a greater chance of them purchasing the deal if it is targeted. They want to send the right kind of consumer to the merchant. Merchants tend to be happier when they receive quality customers that spend more and become regulars.
Listing a deal vs curating a deal
If Google is planning to allow businesses to self-list their deals then this is a completely different type of business than some of the smaller, most specialized group buying sites. It is a quality vs quantity situation. Deal curation is a specialized business that requires time and resources to do due diligence on whether the business is somewhere that the company would recommend. It even can come down to evaluating the deal by researching other similar deals in the area. Group buying sites have a level of trust with their consumers and if they feature a deal it is like an endorsement of the business as well. If this level of homework is not done, which the consumer has come to expect, I wonder what the long term consequences will be.
Consultation and a personal relationship needed for Merchants
On the merchant side, especially for businesses that have not used group buying before (and there a are a lot of them!) it is an education process. Group buying sites that succeed and get repeat business are those that “partner” with the merchant over the long term, understanding their overall business goals and walk them through the promotion, from start to finish. Merchants need to be shown how this can work for their specific business as it is not a one size fits all. Promotions can go wrong and good merchant servicing can quickly address issues during the promotion to avoid disasters. We all have heard horror stories from business owners that were overwhelmed or put out of business with the volume the sales generated by Groupon promotions. I wonder how Google will manage this process.
Exposure and over-exposure
Google does infer that merchant deals will get exposure on Google’s Ad Network and this could be another reason for caution. Keep in mind that many small businesses only have up to 10 staff so handling huge volumes of customers can actually put them out of business, and/or create bad customer service experience. Google will need to be careful to consult with each business and ensure that they are not overexposed through email and ad network promotions.
The pond is still big enough and getting bigger
Believe it or not, not everyone knows about group buying – and I’m talking about both business owners and consumers. It is easy to read tech news and think, this is old news and all merchants are aware of this by now. The truth is that the pond of opportunity is still so huge. There is still plenty of room in this country to tell the story to business owners looking for new customers and to price-conscious shoppers looking for savings and new experiences. Groupon has done a good job at carving out the way into mainstream market for the clones to benefit and leverage off of. (I’m thinking of the Today Show and GMA appearances, Charlie Rose, Forbes, etc etc.) Bringing group buying to a mainstream audience educates everyone and makes the pond a bigger place. Despite the pitfalls of group buying that I have pointed out, Google Offers, with the power of the Google brand will do even more to raise awareness of this phenomenon and create even more of a win, win situation for all group buying sites and consumers.