What do Plasma TVs, Ikea and Ford have in Common in China?

chinese_computer_usersA growing trend in China is group purchases, a concept in which consumers organize a group online to get wholesale prices from retailers or distributers.  Online Group purchases can include any number of items ranging from plasma TVs to Ikea furniture to even Ford cars. 

Sam Flemming founder and CEO of CIC , the first Internet Word of Mouth (IWOM) research and consulting firm in China, has penned several blogs (such as this one ) about this phenomenon and its growing relevance within the world of social media, specifically related to IWOM, which according to Flemming, is “not only influencing purchasing decisions, but also the way people make purchases.” Flemming also believes that using such a network to bargain shop for products is a natural online extension for the Chinese, who by the way outnumber the United States in both number of internet users and hours spent online

From the Hands of “Netizens” to the Arms of Companies

Until recently, group purchases where initiated by “netizens” in a grassroots fashion.  However, this trend is changing as brands and communities are recognizing the opportunities that lie in such forms of e-commerce.  In fact, last year when Gome, the largest home appliance retailer in China partnered with KDS, one of the most popular BBS groups, the results where overwhelming.  This particular case study yielded more than three times the desired results.

Turning Critics into Converts 

However, not all retailers are thrilled with the idea.  Last December, a Ford dealership ran into some problems with a group purchase deal which left some dealers rather unhappy.  Flemming addresses this by saying that “automakers must develop a deeper understanding of trends and see group purchases as an opportunity rather than a threat.”

Awarness chartI couldn’t agree more.  Why?  Not just because of a growing trend, but rather because I see online group purchases as an especially effective way to build and maintain customer loyalty by using social media.  Moving a consumer through the process from brand unawareness to brand loyalty (which involves the in-between steps of awareness to consideration to interest to trial to initial purchase) is no easy task.  But once you achieve brand loyalty, brand equity usually follows.  And online forums to connect similarly-interested parties are an excellent way to move audiences through this process.

Beyond Point of Purchase 

Group purchases not only benefit brands leading up to a sale, but more importantly foster after-purchase communication.  Group members get to know one another, share experiences (both good and bad) and organize future purchases – where the brand loyalty is truly observed.   These components create an online sense of community that is much harder to achieve through traditional communication and marketing channels. Additionally, this system allows brands to monitor the online conversation and subsequently respond quickly and efficiently. 

What the Future Holds

Flemming tells us that online group purchase discussions are also becoming more prominent; thus demonstrating the rising popularity of the concept.  Flemming isn’t the only one talking about group purchases.  In, The Christian Science Monitor  and in 2008, the China Herald blog also wrote about the benefits of this concept. 

Source: www.seeisee.comTherefore brands and organizations should take notice and find ways to incorporate this type of unique online, social media into their outreach efforts.

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3 Responses to What do Plasma TVs, Ikea and Ford have in Common in China?

  1. Interesting example of how social media is helping Chinese consumers to get better deals and changing the purchase behaviour. I learned quite a bit from the links that you provided and your supporting sources for this phenomenon were very strong. What really helped this post stand out, though, was your analysis of how this example of group purchases that you found could change the dynamic of customer loyalty over time and the place that social media could take in that experience. Great post. (4)

  2. Vincent says:

    This concept isn’t exclusive to China. I’ve been using the group purchasing model with my business in the US. It is cheaper for me to run since I don’t pay any commissions or listing fees, and in this down economy people seem very receptive to waiting to pool an order. I’m currently listing my group purchases on http://www.gotogroupbuy.com. It is worth checking out.

  3. Paul Bove says:

    Nice research to find something new. I never heard of group purchases until your post. I had read about Taobao and similar sales sites in China, but not the group purchase concept. I think it’s a solid business prospect for both the consumer and the manufacturer or brand. Kind of the power in numbers theory (at least for the buyers). I’m curious if your research showed that this is being done elsewhere?

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