How to Get Better Buying Power in Groups

The biggest trend in online savings is "group buying." Dozens of websites are tapping into the power of social networks by offering steep discounts on restaurants and recreational activities in cities across the country, but there are incentives for sharing the deal with friends.

CBS News Business and Economics Correspondent Rebecca Jarvis explained websites, such as Groupon and LivingSocial, offer about 50 to 90 percent off at restaurants, spa services, bowling, fitness classes, bars, and tourists attractions.

Jarvis said, "And what's great is not only can you look for daily deals in your city, but in advance of a vacation, search for group deals in cities you're going to be visiting, and you're bound to get some great discounts on fun things to do there."

But how do they do it?

"They're basically using you for free advertising," Jarvis said. "You help create business for them. Here's how: every day you'll receive one offer and the sites will ask and incentivize you to communicate deals to your friends on Facebook and Twitter and email. By doing this, you're doing them a favor, and helping them cut costs. They're returning that favor with a deal."

Groupon is the most popular site, Jarvis said. She explained the site offers daily deals for 94 U.S. cities. With Groupon a certain number of people need to buy into a deal in order for it to activate. Jarvis said Groupon reports this happens about 95 percent of the time. If you buy "a deal," you get a voucher via email that you can cash at the business. If not enough people buy in and the deal doesn't activate... you won't be charged.

They also have a no-questions-asked refund policy. If you weren't happy with a service you purchased through the site, you can get a full refund.

Another popular site, LivingSocial, is a little different, Jarvis said. There is no minimum number of buyers needed. But what's unique about LivingSocial is that once you buy a deal, you get a referral link to share with your friends on Facebook or Twitter. If three people also buy the deal by clicking on that link, then your deal is free.

Jarvis said, "So if I buy a manicure-pedicure deal at a spa, and I convince my three girlfriends to buy it to and come with me, then I get to go for free. How cool is that?"

Finally, Tippr takes a different approach. The way it works is that a deal's value increases for everyone if enough people purchase it. For example, if you buy a wine tasting or restaurant deal for $20 that offers $50 in value, the deal's value could go up to $60 if enough people purchase it.

But buyers should beware. Jarvis suggested these tips:

Read the fine print. Sometimes you'll buy a deal, but it can only be redeemed on certain days, or at one particular location. Also take note of the expiration date.

Beware of impulse buying.

Check out the business. Jarvis said all of the websites we spoke to say they do vet all their business first to make sure they can handle a huge surge in business after featuring one of their deals.
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