Collective buying power is when a group of consumers come together and use the old rule of thumb, there’s power in numbers, to leverage the group size in exchange for discounts.(source Wikipedia)
Collective Buying power is nothing new, but with the advent of social networks, internet companies are leveraging this concept with considerable success. This is social commerce – the use of social media in the context of e-commerce. It has never been easier to form social networks, and we know that we are all on the hunt for a deal! Take Groupon (www.groupon.com)- the main “social commerce” web site in the US. They already have 4m users in the US and this number is growing fast. Their target is 100m users, and the recent financing deal has valued the company at an eye-watering $1.35bn.
I see a number of reasons for the rapid growth of this. Peer recommendations are the strongest form of advertising, and if your friend sends you a discount voucher or recommends something to you; you are much more likely to go for it, than if a company has pushed it on to you. We know that social media gives the customer control rather than the advertiser, and this is simply another example of that. Through promoting the offer via their social network, the customer (and not the promoter) gets to decide whether it is a success or not. The seller is the individual and not the company. It is a trusted environment, and that is key. The potential for sales from a company perspective is huge if done right. Just think about it. You as the company send a customer an offer on 2 for 1 lunches provided 50 people come through the door on a certain day. The customer likes it and tells 3 friends. They in turn tell 3 friends. And so on. A viral loop is created via social networks. You can track the message, how it has been received, who has responded to it and the call-to -action. As a means of clearing stock for firms, this can be one of the most powerful means yet. Watch this space. Groupon have probably had another 100 subscribers in the time it has taken me to write this blog!
Here is an introductory video to show what it’s all about Collective Buying Power