Why location is the future of group buying

Ever since the initial explosion of the group buying space starting in 2008, the industry has steadily evolved to find new ways to present amazing deals to consumers, and bring real value to merchants. Groupon can be credited with bringing the much-needed concept to fruition, merging a sector of commerce that was only ever offline, into the digital realm. What resulted was a massive shift in the way ‘real-world’ businesses could market themselves.

In the beginning Groupon and its rivals offered deals across a very wide range of categories, to a highly untargeted audience of shoppers. While this worked well to build a foundation from which the company would expand, further innovation was needed to fuel positive growth. With a growing inventory of deals, Groupon reached a point where their Groupon Now product became viable. This made Groupon location aware, and as a result increased the relevance of deals that could be delivered to consumers. Deals were instant, and based on users’ whereabouts. This made far more sense for local commerce than mass mailing generic deals, as consumers now had another reason to a try a deal – it was near them.

Location targeting is a huge step from the earlier days of blasting users with generic deals, most of which would simply annoy users. This is known as the shotgun approach or push based marketing, and is largely the method used by traditional forms of media such as television, radio, and print. Similarly, Groupon’s service has come to resemble the digital form of junk mail for an increasing number of people. They harvest email addresses to then blast users daily with offers that at their best, match the city in which they reside. The basis for purchase becomes not the relevance or location of the offer, but the size of the discount that the user sees. While this has been tremendously successful for Groupon and its clones, the effectiveness of this strategy is diminishing. With market saturation approaching, group-buying services must begin to tailor the deals they deliver to increase relevance to the user, and sustain the effectiveness of their promotions.

The next step in the group buying industry is a focus on location, or the targeting of deals based upon a user’s geographic whereabouts. Group buying aggregators have the upper hand here, as they possess the largest database of deals that can be precisely targeted towards users both on a website and in customized emails. While group-buying providers often do not posses enough deal inventory to precisely target locations, they can take advantage of mobile platforms to serve deals when a user is in close proximity to a merchant. Deals can also be redeemed via smartphone without the need for printing vouchers, making redemption easier while increasing conversion rates.

The advantage that location targeting presents is double sided. On one hand, consumers don’t have to wade through mountains of deals each day in order to find one that is right for them. Deals near them are immediately shown, which is particularly effective with physical merchant types such as restaurants, beauty, health, and activities. The end result for consumers is that time is saved and a greater level of convenience is offered. The second advantage lies with the merchant. The entire purpose of a group buying promotion is to attract and retain new customers in a more cost effective manner than traditional forms of media. By serving deals near a users’ geographic location, they are more likely to return to that business in the future as a result of geographic proximity. It is the businesses that are located near consumers’ workplaces and homes that become the most visited. Location targeting allows merchants to reach the intended audience, and retain them as loyal new customers.

As group buying is still in a relatively early stage of its life, a variety of market innovations should continue to emerge. A future development that may occur is a real-time deal system that will enable merchants to create offers instantly based on their current level of demand. Users would be targeted accurately via smart phones and the web according to their location and customer profile. What will result is a near perfect advertising model through which merchants can boost low demand while consumers are able to purchase exactly what they desire at any given time.

– Stas Belkov is the Co-Founder of DealFetch.com.au, an Australian group buying aggregator.

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