Merchants aren’t the only ones struggling with Customer Loyalty in Group Buying. Daily deal sites are struggling with their own issues of loyalty at present with most customers being signed up to numerous daily deal sites with the driver to purchase being predominately the deal itself, the best deal from the best merchant. Most customers who shop with multiple group buying sites rarely recall which provider they secured the deal through. Group buying sites that wish to continue to flourish need to focus aggressively on personalisation, targeting and ways to build customer loyalty.

It is great to see a few of the big boys looking at ways to build loyalty for their merchants. Bloomspot is a Group buying provider that allows for tracking of customer spending at particular merchants by analysing credit card data. This enables a merchant to provide additional discounts to returning customers without having to do their own tracking. Groupon has also recently launched “Groupon Rewards” which works in a similar fashion. Groupon rewards customers shopping at the same merchant by unlocking additional discounts.

It will be interesting to see how the Australian Daily Deal sites tackle customer loyalty as we head into 2012.

Daily deal sites are booming with group buying providers expanding at a rapid rate across numerous verticals, from kid’s products to beauty, travel, pets, farming equipment-you name it. With this rapid growth, Group buying in Australia is set to be a $400 million dollar market by the end of 2011.

The massive success of group buying is mainly due to the large customer uptake and viral spread of offers combined with the benefits of mass marketing for merchants. According to Billy Tucker CEO of Cudo,

The great advantage to businesses who engage in Group Buying campaigns is that it is a pay-for-performance model. The business only pays if a target number of customers come through the doors. This means the merchant knows what their minimum return on investment will be and can measure performance down to the last dollar

However, like any industry experiencing growth like that of the daily deals market, it has been subject to its fair share of uncertainty regarding its effectiveness.

According to a recent study by a proffesor at Rice University around 80% of customers using Groupon style coupons are first time customers, meaning group buying is definitely doing its job in bringing in new customers, but unfortunately this study also revealed that only 20% of customers return to a merchant and this is where a merchant can really build a strong ROI so loyalty needs to be much more of a focus for businesses.

Loyalty for the Merchant

With the boom in online retail sales , customer loyalty is becoming harder and harder to build and maintain with price point, delivery times and product range being the driving forces behind online shopping. Despite this boom, online still only accounts for 11% of the $245 billion spent on retail in Australia with over 65% of people still preferring to shop in store. This gives retailers who have a multi-channel offering including a physical store, a massive advantage to add that additional level of personalisation and customer service, which is much more effective at building brand loyalty.

Customer Service is Key

Through research of some high profile daily deal sites and also having worked across development platforms for deal providers as well as business development, It is revealed that one of the biggest mistakes that merchants make, is that daily deal customers are generally treated as second rate and do not get the full customer experience from the merchant like full paying customers. This is mainly due to the fact that daily deal customers are generally not as profitable initially….and can also sometimes be harder to please. Not giving deal customers the full customer experience is basically a waste of the group buying campaign to begin with as money is rarely made on the campaign itself, but rather on the up sell, return and referrals from happy customers.

Customer service is the most important point to remember, if you only remember one thing from this post then this will be it; Wow every customer that comes through that door!

Shoppers are going to try multiple merchants and the ones who treat deal customers like all other paying customers will be the ones that stand out and the ones most likely to build loyalty and encourage referral business. Do not waste each new customer that running a deal has brought you. See each customer as an opportunity, an opportunity to create a brand advocate, a loyal customer, and most importantly a profit.

Be Prepared

The deal site has done its job, it has brought you possibly hundreds of new customers and you need to make sure you are prepared for it, from a process point of view and from a resourcing point of view. The last thing you want is to create a negative experience for these new customers and your existing customers by being unprepared.

Daily deal customers can be a lot tougher to please than regular customers and most rarely spend above the voucher value, (36% according the Rice University study) this can sometimes have an impact on the way these customers are treated by the business and its employees due to the profitability they provide in that particular transaction. The focus needs to be on creating a positive customer experience. Sure, up selling is great and can help offset some of the cost of running the offer but it mustn’t be the priority.

Measure

This approach may seem a little challenging as it is sometimes difficult to track the return on investment in the long term. You can measure the ROI for your offer by tracking the following:

• How many customers are new customers?
• How many customers came back and how much did they spend?
• How much money was spent above the voucher amount?

This is all quite easy to track with an in house database, loyalty program or POS system.

So here are a few key points to help build loyalty for Daily Deal Merchants

• Prepare your employees with the tools to wow deal customers as well as regulars
• Customer service is key
• Sign up customers to your loyalty program or internal database
• Encourage customers to check in  via social networks
• Incentivise customers to follow you on social networking sites like Facebook and Twitter
• Provide incentive to promote return visits, e.g. 20% off on your next visit
• Incentivise for online reviews of your product or service
• Refer a friend programs
• Be prepared to handle the increase in customer traffic across all channels

Desired results for a Group Buying offer

Let me share my own story with you. My partner and I purchased a coupon for $30 for $60 worth of food at a place called Avido Wine Bar. We never would have tried this place otherwise but turned out we loved the food, the atmosphere and the service. The staff was well prepared and treated us very well and we had a great time. A month later we returned with a group of 10 for a Christmas party at full price, not bad, the restaurant would have already made its money back on our coupon 10 fold. We received the same great food and the same great service so 6 months later we returned for our engagement party and booked out the whole restaurant for the day. Now that is a successfully run campaign! If we were treated any differently or given second rate service then we never would have returned.