Wansum Li – Intro to Marketing

Recently, social buying sites like Groupon have gained popularity. From a consumer’s point of view, it’s great to score a significant discount on businesses that one would have gone to regardless. It does encourage people to spend more because of the perception of savings. I would imagine that people might end up buying an extra tshirt because “it’s on sale!”

From an organizational point of view, Groupon seems like a great promotional tool. It encourages new customers and rewards existing customers. The problem seems to be that companies are not able to convert new customers to returning customers. Many new customers turn out to be one-time-only customers who are merely looking for the next great deal. As well, many companies complain that the substantial cut that Groupon receives, along with the often more-than-50% discount makes it difficult to profit from such promotions. As well, many customers that purchase the Groupon deal are existing customers who would have generated revenue regardless. So if companies aren’t making additional profit and aren’t converting new loyal customers, perhaps marketing dollars are better spent on other promotional campaigns. If that is the case, I wonder if social buying sites are here to stay, or if they are just another fad.