Trend 1: Social buying
The frenzy around social buying is palpable these days. With deals like 75 percent off a Pilates for Pets package, how couldn't it be? The real question remains: Is there heft beneath the hype? Let's see if our debaters think it's really wise for you to group on to this trend.
The brand: Leave it
The idea is smart -- give consumers a deep discount they can't refuse while sucking the life out of local businesses; they won't know any better. The idea was strong and worked well on a local level with two or three top-tier innovators in the space. That is, until more than 500 of them came along, and then the larger players started opening their database up to national deals. Once larger brands caught wind of the idea, all hell broke loose. All of a sudden, we have a whole new channel on our hands to navigate just like the ad network world of yesterday.
Social shopping cheapens brands, cannibalizes customers, and creates bad habits for consumers. I don't think Neiman Marcus or Apple will be doing a group-buy daily deal whatchamacallit anytime soon. That is because the company has a classy brand and strives to uphold the aspirational nature of its brands.
As soon as a brand does a large-scale deeply discounted daily deal, consumers see multiple signals. Is the brand having trouble? They might not have thought of buying from the company before, so they start to check out your competitors. And then starts the perception driver. The driver that they will only buy from you when you are on sale. Even when you wow them with your product at 80 percent off, they expect you to always woo them with your product at 80 percent off -- and you will probably have to if you ever want them to come back. They also tell their friends, "Go buy this product for X dollars, 80 percent off." Thus, the trail of cheap starts rolling in.
Not only will the new customers start off on the wrong foot, but your current customers will also perceive that they have been paying too much and begin to buy what they were already going to buy at full price -- for 80 percent off. The deal sites require such a steep discount that there is almost no way of getting around this. The technology is typically not strong enough to do very complex things like de-duping its list from your new customer list -- wow.
When your customers and prospective customers start to only buy from you or your competitors for 80 percent off or more, no one wins -- well, except for the social shopping site.
The agency: Love it
Clearly Google's $6 billion dollar bid to buy Groupon reflects Groupon's ability to make money off of businesses that use it, not for businesses that use it.
My friend Dan owns a chain of pizza joints called the Lanesplitter and was recently approached by LivingSocial to do a promo. "It sounds like a great way for me to lose a massive amount of money," Dan told me, "Am I missing something?"
Yes and no. If Dan takes time to do the numbers and is careful, he could gain widespread awareness for his new location (on San Pablo Avenue in Emeryville). If he's not careful, he could very well lose his shirt. I told him to pass.
But there's a reason that Forbes is telling us that Groupon is the fastest growing company ever. It's because the way people interact in a socially connected world has fundamentally changed forever. People like to participate, they like to give each other deals, they like to feel like they've won, and social shopping empowers them to do that.
And Groupon's not the only game in town. Many retailers are already experimenting with their own social shopping promotions. Taking advantage of social buying doesn't have to equate to giving 80 percent on Groupon or LivingSocial.
My brand antagonist makes great points about cheapening brands and creating bad habits, but there are loads of companies already doing that on their own by focusing their entire marketing programs on direct response and quantifiable ROI. Social shopping is a tactic, and one that marketers must use wisely like any other. But it's a powerful tool in the modern marketer's toolkit.
