The Group Buying Phenomenon

What works, what doesn’t and what to watch out for! by MELINA ROHAN

As ADMA has been asked to assist with the Group Buying Code of Conduct, I thought we might continue the theme to further explore what works
in group buying promotions and what doesn’t.

Data Scientist, Paul Butler recently deconstructed the group buying phenomenon in an article in the Harvard Business Review.

Paul’s investigations revealed that the most successful offers in the US have been the promotion of popular apparel items for 50% off.The most successful was $25 for $50 worth of shoes or $25 for $50 worth of apparel at the Nordstrom Rack offered in the US on November 24, 2010.

Here in Australia, group buying sites such as Cudo and Spreets has taken the consumer market by storm. The group buying category has been so successful that it now accounts for more advertising spend than display advertising. In reality, it is using the same principles of direct marketing but in a new and original way.

Group Buying relies heavily on email marketing which means the Spam Act applies. Group Buying companies need to be on top of the three key criteria of the Spam Act;

1)     Ensuring that emails are only sent where there is inferred or express consent;
2)     The sending company is properly identified and
3)     The email contains a functional opt out.

The group buying business model involves the collection of personal information and it is key that this information is kept safe and secure. Privacy Policies about the use of the customer information they collect are in place and that they act consistently with the Australian privacy regime.

The area that has the most potential pitfalls is the area of misleading and deceptive advertising because it’s one of the most complex pieces of legislation for marketers. Meeting the benchmark of ensuring that the consumer is not mislead about the nature of the offer has wide-ranging consequences including making sure that each deal is clear and includes all relevant information including any limitations on the offer.

ADMA is working with the group buying sites to help make sense of this patchwork and bring it all together in one form. We are doing this by developing and launching
a code of conduct that everyone in the category can sign up to. The code of conduct will set minimum consumer protection standards, help the industry deliver a minimum standard of service to consumers and provide consumers with an open and transparent avenue for addressing any issues.

It’s a great initiative that will demonstrate the categories commitment to good practice, ensure consumer confident and ultimately continued growth.

For more information on the Group Buying Code of Conduct email code@adma.com.au

For more information on how to comply with the Spam Act click here.

Posted by Melina Rohan, Director – Corporate and Regulatory Affairs, ADMA