• by Beth Freedman , March 22, 2010

A while back a colleague of mine made me aware of a local site that offered discounts based on group buy-in. The premise was simple -- retailers would offer a significant discount on a product or service, but the availability of that discount was predicated on a set number of people signing up (and pre-paying) to take advantage of it. The offer is open for a limited period after which time, if the pre-requisite number of people registers, the offer is redeemed and the registrants are charged. If not, the offer expires and no charges occur.

This concept is simple, transparent, and viral genius. Those who sign up are well aware of the rules. They know that unless the stated number of people sign up, the offer won't be honored. And so they take it viral, encouraging their friends and family in hopes of gaining enough interest to hit the threshold.

The key to making it work, however, is that the discount offered must be truly significant. These days, consumers are less willing to play Pied Piper for brands unless the payout is deemed extremely high value. Yes, they want to be seen as trendsetters by their "followers," but in today's economic climate, a trendsetter is as much if not more defined by the deal you've secured as the product you're walking away with.

For brands, it's a managed-risk proposition with the possibility of extremely high payout:

• It allows you to determine a very competitive price point, figure out how many participants you need to make it pay out, and safely test it. If you don't reach the threshold, the offer goes away. If you do, you've already determined the payout is favorable.

• It allows you to tap into your loyalist audience, not only for response, but so that it can viral your offer among its peer group, thereby extending your brand message and pulling in more opt-ins for future remarketing.

• The media that drives it is low-to-no cost: email, mobile, Twitter, Facebook, your website.

• It can be used to test offers that, depending on the response, may in some form be applied to your larger consumer prospect audience.

While I think that the concept of the "group coupon" can be applied in any category, I've spent a lot of time talking with our travel clients about it. For our smaller clients, who have felt the pain of trying to compete against bigger players in today's discount-driven environment, this is a way to field strong discounts but in a low-to-no-risk manner. And for all of our clients this can be a way to deepen the relationship with their loyalist consumers and attract new ones.

And what a great way to start a relationship with a new consumer -- by providing an unbelievable value. Imagine converting new prospects into customers and brand ambassadors all at once, all while hitting your stated goal. Now that's a collective bargain we can all get behind.