Why to use a group buying campaign / promotion?
If you do not have a valid reason and strategy behind your actions, this tool, like all other tools for web marketing, will backfire on your business. You should first have a valid reason for utilizing a group buying campaign. Below, you can find the top 5 most suitable reasons for offering a group buying promotion:
1) Selling excess capacity; if you have a huge inventory or low capacity utilization, group buying sites can be great for you to utilize your production capacity
2) Advertising for awareness; if structured well (low cannibalization, covering variable costs, and not destructing the perceived value much), group buying models are the best awareness tool that you can use
3) Giving a trial to an excellent but not very well known product/service; if you believe in your product very much, and think the customers will be back, no matter the price point, then this is a great way to make your trial known (make it clear to your users, this is only a trial pricing)
4) The Refill Model (the model utilized by firms like Gillette & HP likes); sell the main products on group buying sites and the customers has to buy refills from you in the future
5) Cyclic / Seasonal business promotions; if your sector suffers from seasonality this is a great way to increase utilization on low seasons (make sure that the promotions are only for low seasons)