The last few years have witnessed the emergence of ‘daily deals’ as the major marketing innovation for small to medium sized retailers. With the promise of reaching thousands of potential new customers, businesses have eagerly signed up with companies like Groupon and LivingSocial, offering deep discounts as a lure for new customers. As popular as these programs have become, there has been little discussion of whether they actually work. Do ‘daily deals’ genuinely help the retailers that use them? That is, are the large discounts worth the price? Are they generating new customers or merely providing established customers with giveaways? And finally, if retailers aren’t seeing long-term benefits from ‘daily deals,’ is there something else on the horizon that might actually produce the desired results?
Given the large number of businesses that have tried running daily deals over the past few years, we now have a substantial data base which permits us to evaluate the efficacy of these relatively new forms of promotion. For example, Utpal Dholakia, a professor of management at Rice University Graduate School of Business, recently published his findings on the daily deal trend for retailers in an article entitled “How Businesses Fare With Daily Deals: A Multi-Site Analysis of Groupon, LivingSocial, OpenTable, Travelzoo, and BuyWithMe Promotions.” Professor Dholakia found that while it is certainly possible to have a profitable outcome from running a daily deal, only around 55% are profitable and only 48% of businesses that try one daily deal, opt to run a second. Foodservice and beverage retailers are even less enthusiastic, with only 36% of merchants opting to run a second daily-deal promotion.
READ THE FULL ARTICLE.