Ellen Tsang

After all the poopy humour below (See Poo-Pourri Posts), let’s talk about something more serious, but equally interesting and relevant to the marketing world.

Group buying, also known as collective buying, is a form of e-business that offers products and services at significantly reduced prices on the condition that a minimum number of buyers would make the purchase. Many online services have arisen out of this concept of group buying. In this post, I will examine the use of group buying as a form of e-marketing.

Advantages of Group Buying:

• Inexpensive Marketing Channel – As group buying has originated from China and I personally am from Hong Kong, I will use Hong Kong’s group buying market as an example. The group buying website plays an important role as a “marketing channel” rather than a “sales channel”. The advertising fees from merchants for a group buying strategy are lower than spending HK$700,000 for a 30 seconds commercial slot on TV or HK$40,000 for a spread on a Hong Kong magazine. It is estimated that the Hong Kong consumer group buying market generates revenues of HK$60 to $70 million each year, with more than 80 players now offering daily deals in the market.
• Attract Many New Customers – Group buying could help merchants to develop a consumer base quickly to integrate off-line resources.

Disadvantages of Group Buying

• Limited Range Of Products Available – Suppliers are reluctant to sell a broad range of products through group-buying companies, so the options are limited. Thus, consumers would not be able to know right away about all the products or services a company has to offer.
• Event May Be Cancelled Causing Consumer Dissatisfaction – When participating in online group buying, payment comes before delivery or service. Hence, if the product or service cannot gather enough buyers, the event will be cancelled and the money will be refunded back to the consumers. Sometimes, it may even cause customer dissatisfaction.

Related Links:

http://www.businessmarketingblog.org/online-marketing-with-group-buying-websites/

http://mashable.com/2010/05/24/stoudemire-facebook-store/

http://www.selfgrowth.com/articles/online-group-buying-advantages-and-disadvantages