Now that Groupon is back in the spotlight with a successful second attempt at IPO, I started thinking about the company again and what made it so successful in the first place. Besides launching at the right time, in a down economy with rising unemployment, Groupon utilized all classic principles of persuasion to influence purchase decisions. As identified by Robert Cialdini in his book, Influence: The Psychology of Persuasion, these principles are: reciprocity, commitment and consistency, social proof, authority, liking and scarcity.
Reciprocity
This tactic is pervasive across all disciplines of marketing. This is when you’re given or offered something for free with expectation that you’ll return the favour. Some marketers ask for something in return almost immediately, while others intend to influence your future purchase decisions. Since Groupon’s model relies on the high numbers of users. The more users they have the easier it is to make its pitch to businesses, and better discounts it can negotiate with them. Groupon offers a generous $10 for every friend you refer that makes purchase. You don’t even have to make a purchase, all you have to do is tell your friends about Groupon. The trade-off here is great. It’s no cost to you and you get credited real money for spreading the word.
Commitment and Consistency
The premise behind Commitment and Consistency principle is that people tend to be fairly consistent in their behavior once they make a commitment. If a user invites their network to use Groupon, and even if they do not actually make a purchase, they’re in-effect saying “I recommend this because I just bought something or plan on buying it in the future.” In addition, Groupon has a presence on all major social networks. They make it easy for users to like, retweet and follow the company, furthering your commitment to them. The company has also mastered the art of consistency. You are guranteed to get a daily email with a great daily offer. As a company, they have conditioned their audience by being consistent in the offering and commitment to great deals. What makes this tactic effective is that people tend to value consistency in others as well.
Authority
All marketers know that authority yields a great deal of influence. Think of advertisements for toothpaste, “4 out of 5 dentists prefer this brand over the other brand.” Groupon established their authority very early on. They created a brand new market out of nothing, created thousands of jobs and delivered an astonishing number of deals. With that impressive CV how can you argue that they’re not an authority figure in the space?
Liking
Research shows that we tend to buy from and are influenced by those who we like. There’s a lot to like about Groupon, although they’ve taken a few missteps along the way. However, you have to admire this startup’s drive to constantly improve, educate, and their pursuit of high customer satisfaction.
Social Proof
Social Proof principle states that you are likely to be influenced to behave a certain way if you see others behaving that way. For example, if you’re walking down the street and see group of people looking up, you are very likely to look up as well. Groupon displays social proof by listing the number of Groupons that have been purchased. The higher the number, the further proof you have the deal is well worth it.
Scarcity
Scarcity if one of the most effective tools of influence. Scarcity creates a sense of urgency, thus speeding up your purchase decision. Every time you look at the deal, you are presented with a countdown timer. This forces a user to act quickly if they want to take advantage of the deal.
Robert Cialdini identified six strong principles of pursuasion that have been tested in laboratories and in the real world. Each one on its own is very strong source of persuasion, but when used in combination they become a killer deal hard to pass on.
