Sites such as GroupOn, Living Social and Gilt Group take substantial amounts in transaction fees promoting brand deals.  The percentage taken in commission by these sites is approximately 30%, as reported by Techcrunch (http://techcrunch.com/2010/05/02/teardown-groupon/).   This means that for every $50,000 spent by consumers on deals, $15,000 goes to the deal site promoting the offer.  But what does $15,000 actually buy?  The answer is very little besides a closed deal.  Obviously closing deals take a certain amount of advertising and promotion, but why would a brand continue to keep giving such large transaction revenue to group sites when that can do it themselves?

Easier said than done, well actually it is and here’s why and how.  Brands offering deals through 3^rd party sites miss out on direct customer interaction and instead, rely even more on the deal sites to provide a constant flow of buyers.  Also worth mentioning is that buyers coming from deal sites are less likely to ever buy a product from the same brand at the full price.  Some restaurant owners have even complained that dining customers who have entered solely through deal sites don’t even leave a tip for the waiter, in order to fully utilize the low price of the deal.

After calculating exactly how much is paid in transaction fees, this money could easily be used to setup their Facebook store and run their own Group Offers and Group Coupons.  The advantages are huge.  The brand has direct interaction with Fans (potential customers), fees and revenue are substantially lower and the cost of acquiring Fans may start high, but will steadily decline as more social interactions are used.  The direct fan base engagement alone should be enough reason for Brands to run their own exclusive offers.

Storefront developers such as Zibaba currently offer their merchants Group Buying and Group Coupon functionality directly from their transactional Facebook store.  The transaction fee takes into account that brands need to do their own marketing, but at 5% to 8% of the transaction fee, that’s a substantial saving.  Sites such as GroupOn insist that merchants offer at least a 50% discount.  Running their own deals, they set their own discount.  Zibaba also has a unique approach to generating traffic to their merchant stores.  Based on the principal of online affiliate marketing, Zibaba also comes complete with a network of professional online marketers who get paid only on performance.  Add this to the social nature of Facebook and that 83% of online shoppers are interested in sharing information about their purchases with people they know, while 74 percent are influenced by the opinions of others in their decision to buy the product in the first place, and anyone can see the advantages of running their own deals and offers.

The average consumer mentions specific brands over 90 times per week in conversations with friends, family, and co-workers. (Keller Fay, WOMMA, 2010).  Wouldn’t it just make sense if they were talking about your brand and not just about the great deals they can get from GroupOn?

Related articles

• E-Commerce Providers Adding Facebook Stores to their Offering (commerceonfacebook.com)
• Who Is Likely To Buy in a Facebook Store? (commerceonfacebook.com)
• Deals on Facebook – A Competitor to GroupOn (ignitesocialmedia.com)