If you are the owner or manager of a florist shop, then the quiet months of winter are a great time to think about how you can promote your business to the flower buying public.
One marketing option that may tempt you is the red-hot new group buying coupon trend.
What are Group Buying Sites?
In the last year there has been a rapid proliferation of group-buying websites. These sites deliver big discounts to consumers who sign up to receive daily deals via email, which they can buy into.
The vouchers work on a group buying system, where a certain amount of people must commit to the purchase before the deal goes through. If the minimum purchaser amount (or more) commit to buy then the consumer’s cards are charged and they get a discount voucher emailed to them.
This service is popular because it provides bargain hunters with awesome deals. I recently bought a car servicing for an obscenely low price!
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Should You Try This To Promote Your Floristry Business?
From the perspective of florists, on the surface it seems like a no-brainer – sell some flowers for a small loss to win over some completely new customers. After all, you gotta spend money to make money, right?
Hmmm … let’s think this through …
I did some Googling around on the subject and it soon became obvious that while some people claim to have benefited from the concept, many small business people are reporting negative experiences with group buying as a promotional strategy. Many said that their businesses were overwhelmed by the sheer volume of low-value transactions they were then required to service. Some have their doubts that they got any real benefit out of the deals and report gaining little more than stress from the experience. Why?
How Group Buying Deals Are Structured
I just got off the phone to a friend of mine who is a small business person (not a florist). She recently tried a major group buying site and isn’t very impressed with the experience.
She said that the deal she discussed with the salesman was for $120 worth of product but the salesman insisted they claim on their site that the real price was $180 so it looked like an even better deal. She went along with it but later regretted it, because now she realizes that when she goes to make subsequent sales to the customers this deal brought in, they are quite likely to notice the difference in price and realize that they’d “been had” (of course she could just charge them $180).
They agreed to make the discount price $59 but the group buying site take 50% of the asking price so once she had paid GST on her half that left her with approximately $27 per sale, which is about a 77% discount!
63 people purchased the deal. The coupon company takes in ALL the money up-front and then pays service providers ONLY for the coupons that actually get used – which she has to manually enter each week into an automated online system – an additional, admittedly small, admin task to be factored into the cost.
In the one month since the deal ran she’s had 20 vouchers cashed in, which in this case represents 30 hours of her billable time, but has not seen one red cent yet despite being promised prompt weekly payment. Consequently she’s been spending loads of time on the phone trying to get paid.
Of these 20 clients she’s had one repeat visitor. So, assuming she eventually secures the $540 the coupon company owes her, she’s so far spent $1840 (plus additional admin time) to acquire one new repeat customer.
The hard truth is that just because a person buys an item for 50% off does not mean they will return for normal priced products, in fact, on average less than 20% do.
So let’s break it down:
How to Calculate the Cost of a Group Buying Deal
Let’s say the original retail selling price for one of your wonderful bouquets is $200. Say your company sells this at a 100% mark up, so it costs you $100 wholesale.
If you enter in to a group buying coupon deal and sell the products at a 50% discount – then pay the coupon company 50% of the discounted price – you lose $50 on the sale.
Now, if only 20% of these new customers return later then each repeat customer cost $250 to get back into the store to the point where they are prepared to buy something at full retail price. This means you will not make any money out of them until they buy their FOURTH $200 bouquet and even then you will still only pocket 50% of the usual profit on that fourth sale. (However, if you are confident that the lifetime value of these customers is likely to end up being significantly higher than this amount, then you may decide it is worth the initial cost.)
Also consider this: what if some coupons were sold to existing customers who would otherwise have bought at the full price?
There are lots of ways to buy new customers that are a lot cheaper than this!
Have any florists or events companies out there used a group buying promotion? Let us know in the comments below how it went for you – was it worth it?
Written by Seamus – Tesselaar’s website manager and marketing nerd.
Photo by Ashleigh290
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