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Co-buying companies sell flawed benefits

Buyapowa - a co-buy offer in actionIn the heady days of the 1999-2000 dotcom bubble, one of the exciting business models was the reverse auction. Fast growth companies like Mercata were raising lots of investment to develop what was being sold as the future of shopping.

A reverse auction is, simply, the opposite of a normal auction. Instead of people bidding up the price to buy one item, you make lots of items available and the more people offer to buy, the lower the price goes – and all those customers benefit from the lower price.

Sadly for Mercata, the company failed to float on the stock market before the dotcom bubble burst, and the company closed. Today, we are seeing a reemergence of the reverse auction, but it’s being called “co-buying” – a term more suited to the socially networked world.

Marketers should familiarise themselves with the concept because co-buying has been used successfully in B2B as well as B2C transactions. There has always been a flaw, however, with the benefits sold by co-buying and reverse auction companies. The flaw is that it does not take selfishness into account.

Consumers want great prices, but they want them for themselves and they don’t care about anyone else. The whole sales idea of co-buying has been to tell customers they will get a great price if they buy something and then get other people to buy it too. While it’s a great idea in principle, the majority of consumers act on impulse. They don’t think, “if I can find 50 other people to come and buy this, I can negotiate a big discount”. They want to be assured of the discount for themselves.

Co-buying is a great concept, a great business model and a great marketing strategy. With social media to fuel it, perhaps it will gain more long-term traction than it did a decade ago. But marketers should never lose sight of the fact that people are individuals with selfish needs. If you base your model on a blind assumption that people will co-operate in groups, you may need to think again. The Groupon-style model seems to best meet this selfish need – a fixed discount is offered for a limited time only and the discount is not dependent on how many other people buy.

Give cobuying a try:

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