But now I understand the dynamics, I'm not a fan. They don't really work for consumers, and they don't make good business sense for businesses (except in a few, specific scenarios).
My own experiences with buying group deals have been average to poor. After perusing the websites and selecting what I thought was an amazing offer, I've almost always been left disappointed.
Many services like skincare treatments and massages were impossible to book and almost all of them made me feel like a second-class citizen – and provided me with the service to match!
One time I'd encouraged a regular girls group to meet a restaurant I'd purchased a voucher for, with the promise of a 6-course gourmet banquet for a bargain price. First course was plain bread and it didn't improve from there.
Another time my husband and I arrived at the restaurant we'd booked and mentioned we had a voucher. The waiter proceeded to bring us the 'Spreets Menu' (yes it was actually labelled!) and when we enquired about the meals another couple was having, we were told that wasn't available from the our menu. Our voucher was for 'anything on the menu' up to a dollar amount – but hadn't mentioned there'd be a reduced menu. The service was poor, the ambiance terrible, and we left wishing we hadn't wasted a babysitting night!
That was the last time I've bought a discount voucher.
At Word Of Mouth Online, we've also seen the fall out from discount vouchers. In fact, a large proportion of the negative reviews on WOMO.com.au can be attributed to discount vouchers.
So let's break-down why they don't make sense…
4 Things Consumers need to know about Group Buying Deals
- The deal looks better than it is. The glammed up images and description of the service you're buying is the product of skilled graphic artists and copywriters. Usually the pictures are not from the actual business and are chosen just to enhance the appeal of the service. Don't be fooled.
- You're not saving as much as it says. The value of the service is often inflated. Watch out for extra vouchers thrown in for your next service and other extras – these are used so that they can say a service that is normally worth $150 is somehow valued at $200. Which means that you're not actually saving as much as you thought you were.
- Don't expect silver service. The businesses that participate in group buying deals get even less than you might think for the service. For instance, if something is normally worth $150, the deal might be for $75. But the business probably only gets around $35-$50 once the deal site has taken their commissions. Unfortunately, this usually means that the business makes NO MONEY from us. And even more unfortunately – they usually treat us that way. (Is this right? No – but it's reality.)
- Good businesses don't need to use deal vouchers. Which of course means that most (maybe not all) of the businesses offering crazy deals, are not really the best businesses. They're businesses that want to be busier, but don't have the reputation to attract more customers naturally.
4 Things Businesses need to know about Group Buying Deals
- You're attracting the wrong type of customer. Usually, the types of people that are attracted to deals do not make for loyal customers. They've often travelled across town, and are going to be hard to win over as a loyal client. Plus, they love the idea of a discount – and there's always someone else offering a big discount!
- You might actually lose money. You will not make money on fulfilling the deals – and in fact, it may actually cost you a lot of money. You may even need extra staff to cope with the spike in demand – or just let customers wait and leave unhappy.
- You're risking your best customers. In an effort to service this spike in demand, there's a high risk that you'll turn away (or turn off) your loyal, full-fee-paying customers at the expense of voucher holders.
- Unhappy customers give you a bad reputation. If a voucher holder leaves less than impressed, it's not just that customer you've lost. Remember customers are using the internet as the biggest megaphone in history to let everyone know about their experience with your business. With more that 80% of all purchases starting with a search online (Nielsen), you want to make sure that you have a strong, positive online reputation.
For businesses, the only way to make a deal work, is to make sure that customers using the vouchers are absolutely blown away by your service. They're coming in with high expectations (remember the glammed up images and copywriting), so make sure you do your utmost to live up to that – even though you're getting pittance in return!
For consumers, think about whether the deal actually makes sense. A few examples I can think of are deals for excess or out-of-date stock, and deals for services at off-peak times. If these suit you, go for it!
Anything that seems too good to be true, usually is!
I may be biased, but personally, I'll choose businesses based on their customer reviews.