The science behind the marketing strategies of Groupon and like-minded promotion websites

 

 

 

According to its mission statement, “Groupon features a daily deal on the best stuff to do, see, eat, and buy in 48 countries, and soon beyond.” Since its 2008 launch, several other websites, such as Living Social, Amazon, Yelp, and even Facebook have taken part in this insta-deal trend. And people are digging this stuff right up. Saving money and finding deals is no longer a shameful, frugal secret, but rather, a victorious feat.

So, why exactly is this effective?

For one, Groupon and like-minded websites capitalize on the popular shelf life marketing technique. Placing a time stamp on an offer creates a sense of urgency, which naturally makes promotions more appealing. This can explain the success behind single-day sales, such a the wildly-popular, infamous Black Friday. Time and time again, this sense of “limited time only” has proven to be quite effective. Groupon’s deals tend to have a shelf life of just a few hours or days. When a “special” has a reduced price for a designated amount of time, this induces a sense of anxiety and pressure for consumers, who may fear this type of deal will never come around again. Knowing they have a ticking time bomb may make people  feel they need to buy it now or they will regret it later.

Numerous studies indicate that consumers misunderstand how saving money during special sales or promotions work. Chalk it up to poor arithmetic, laziness, or impulsive shopping, but businesses have become very savvy in tricking their customers. Results from various social psychological experiments demonstrate that we are more inclined to buy a pricier item advertised “on-sale” than a similar, cheaper item not on sale. Moreover, we are more likely to buy that first item e even if it ends up costing more. The famous “buy-one-get-one-free” deals are highly effective for this very reason. People usually spend more money if they know they will be getting another item for free. Business owners know this, and now, they are advertising these deals on Groupon. Typical promotions include spending $10 for $20 worth of restaurant food or take a class for $7 that regularly costs $15.

The success behind these websites and apps can also be attributed to their convenience. They provide novel opportunities for a relatively commitment-free cost. No contracts, no hidden costs, no need to sign up for a whole year. This is a valuable tool for someone who may be on-the-fence about trying a particular business. For instance, Living Social is currently featuring a 2-week weight loss trial for $50. The advertised market retail price is $199. Someone who has struggled with losing weight may be hesitant about spending the full amount for this program. Smart business owners realize this. So, they put out promotional deals in hopes of advertising their services, expanding clientele, and generating more profit and traffic. Just featuring the ad provides an essential billboard for their company website, as people are likely to investigate their business before purchasing one of their promotions. And, let’s say, a consumer buys that two-week weight loss trial, uses it, and finds herself highly satisfied with the results. Chances are, if she continues with the program, she will continue her business with that company than seek out a new one.  do something. For instance, Living Social is currently featuring a 2-week weight loss trial. The advertised market retail price is $199, but the featured Living Social price is $50. Someone who may be interested in trying one of these programs, but does not necessarily want to pay the full price on it, is exactly the consumer the company is trying to reach. The business owner puts out the promotional ad in hops of advertising his/her services, increasing clientele, and eventually gaining more profit and traffic.  For example, let’s say a woman buys this 2-week trial, uses it, and is highly satisfied with her results. Chances are, if she continues with this program, she is far more inclined to continue giving money to this business than seek out a new one.

Customer loyalty; it’s the key ingredient to operating a thriving business.

We live in a technology-driven society, where the majority of young consumers tap away on social networking sites, pay their bills, text-message, and surf the Internet via smartphones. Therefore, providing mobile “one-click” sales makes sense. Both Groupon and Living Social feature downloadable apps. Yelp and Facebook offer “check-in” deals. For all of these, simply showing your phone with the advertised deal is all an employee needs to honor your discount. Users can create an account, store their credit card billing information, and purchase a deal within a matter of seconds. Not to mention, consumers can sign up to receive daily emails and reminders about new deals in their area. No need to clip coupons, carry around paper discounts at the risk of losing them, scour company websites, or wait for things to go on sale. Groupon makes budgeting easy, fast, and convenient–just the way our generation likes it.

The consumer feels like he/she is getting a once-in-a-lifetime steal. The business gains a new customer. Groupon enjoys a cut of the money. Everyone wins.