Group Buying – Smoothing demand to meet supply

Posted on by Billy Tucker

A Targeted Voucher Program (like Group Buying) does more than simply increase brand awareness and consumer demand, it smooths demand to make best use of the available Supply, combine this will upsell opportunities and future loyalty and the returns will continue to flow well beyond the life of the promotion.

Running an above the line Brand promotion will make the target business top of mind for a new set of potential customers, hopefully creating lots of new Demand albeit the profile of that demand is likely to look a lot like existing demand, just more of it! For restaurants, that means what little availability there is on a Friday or Saturday will go first, and once they are gone, customers will be unlikely to settle for a midweek or Sunday slot instead, squandering the marketing investment and the opportunity to introduce your business to a new audience.

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A Targeted Voucher Program is fundamentally different. Why? Typically, when a someone calls a restaurant to book a table they are planning an evening out, they have an evening in mind and are looking for a suitable restaurant to meet their needs, if their preferred night is full, they’ll call the next restaurant on their list; however when they call with a Voucher, they already have a restaurant in mind, they just need to find a suitable evening to redeem it, they have already made a commitment to your business after all (and paid upfront too!)! Voucher holders are willing to book well in advance to redeem their voucher, something an average patron is unlikely to do and upselling your Voucher holder to a weeknight at this point is the first step toward smoothing Demand.

At Cudo, we hear often from business owners that occupancy is significantly improved on Thursdays and Sundays as a direct result of running a promotion on cudo.com.au. The more popular the offer, the greater the impact is on weekday trade, yielding a significant gain in efficiency for the business overall. 

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Making the most of this type of promotion is the role of the featured business, they have to embrace the promotion and the new interest generated, train their staff to upsell and make the most of customer loyalty.

But irrespective of how small the gap is between supply and demand, combine a Targeted Voucher Program with a booking system and you have a very powerful way to improve short to medium term occupancy – make the most of the Program and it will have a lasting impact on your business. 

Breakage is the enemy of Group Buying

Posted on by Billy Tucker

Group Buying is all about hard bargains on great experiences, the web sites (and there are a few) trade exposure to a large audience for a discounted offer and a share of the revenue gathered. Check out most of these sites and you’ll see they are typically focused on the discounts they can negotiate on behalf of their members, crowd-power put to work! These same companies often regale in the millions of dollars they have “saved” on their Members’ behalf, reflecting the margin businesses have given up in an effort to attract a new audience.

But businesses tell us at Cudo that they are being pushed too far by aggressive Group Buying reps, and that they are disappointed by the quality of customers they attract, often finding they are seasoned voucher buyers rather than reflecting their typical audience.

And regardless of their intentions prior to running an offer, a business that has been pushed to its limits will have no choice but to minimise its losses during the process, especially when faced with a lower value customer who is less likely to come back once the vouchers is spent.

Minimising losses means one of two things to these businesses, delivering the service more cheaply to preserve some margin, or hoping the Voucher buyer never shows at all, also known as Breakage!

In fact, some Competitors’ commercial agreements even include a clause intended to maximise the value of Breakage, where a higher percentage of unredeemed vouchers is good for the Group Buying business.

But this is hurting the industry as a whole.

The Group Buying company typically controls contact with the end user, meaning they alone can communicate with the purchasers and encourage them to redeem their unused vouchers, however they are not incentivised to do so, the featured business should be focused on maximising the number of new customers they touch but may be hurting so badly after loosing the battle to preserve some margin that they hope no one ever shows! That said, they are not in a position to talk to voucher buyers even if they wanted to!

Group Buying cannot be about discounts alone, it has to be about incentivising customers to try new things. This is a sampling exercise, not a fire sale. Screwing a business in the name of growing your Member base is counter intuitive, because over time the best of the businesses we want to work with will want nothing to do with the Group Buying category as a whole, hurting the more reputable business out there.

And Consumers know that owning unredeemed vouchers is a lot like having a wardrobe full of clothes with Sale tags on, at some point someone will say “enough” and the buying will grind to a halt no matter how good the discounts are. We are focused on Experiences at Cudo, offered at a no-brainer discount, and we get that the future of the industry is hinged on our customers actually participating in those experiences, not just for the growth of the businesses we feature, but for the future of Cudo  and for the industry as a whole. We will continue to focus on redemption at Cudo, and never encourage Breakage.

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