The Problem with Group-Buying Sites

Everyone is pushing group buying – deals sent out by sites like Groupon and Living Social.  On the surface, it seems like a win-win.  Via UPenn’s Daily Pennsylvanian:

Marketing professor David Bell added that “in theory, [websites like Groupon are] supposed to give you access to … something you haven’t found on your own.” Though Bell agreed that Groupon’s business model does have some flaws, he thinks it is generally a good idea.

The specific problem with these sites is that they create a sale but not a customer.  The key is to build an ongoing, repetitive relationships with your customers, deriving profits from transactions and engagement.  Without repeat purchases, the cost for that first transaction is very high, and making many of those one-time transactions can break a business.

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