Daily deals are good for generating sales among old and new customers
Daily deals sites such as Groupon have been the subject of much controversy in the retail segment. While most merchants have noted that they can gain a significant influx of new shoppers by launching daily deal promotions, others have been quick to point out an adverse effect in store operations: The heavy discounts hurt profits.
New research from ForeSee suggests these one-time deals can be beneficial in the long-term scheme of things. Approximately half of shoppers who use daily deals said they have returned to the retailers that offered these promotions, while another 47 percent plan to do so in the future. The survey results are based on the response of more than 10,000 consumers.
Meanwhile, four in 10 consumers who took advantage of daily deals are already fans of the merchant offering the promotion, whereas 26 percent were infrequent shoppers and 29 percent had never heard of the brand. This challenges the notion that daily deals are ideal for generating new customers, and in fact they seem to be just as effectively used for instilling feelings of loyalty.
"Businesses that use these sites effectively are growing their customer base and customers are getting a deal, which results in a win for everyone. The challenge is for businesses to use this tool in smart ways and to work with daily deal sites who can deliver a good experience to users and merchants alike," explained Larry Freed, the president and CEO of ForeSee.
When offering daily deals, there are two market leaders – Groupon and LivingSocial. Combined, these two sites account for approximately 80 percent of the deals market. Fifty-two percent of customers surveyed subscribe to Groupon, while 30 percent opted for LivingSocial. Groupon's market share was up 1 percent, while LivingSocial's grew from 24 percent.
More recently, half the respondents had bought a Groupon voucher in the last 90 days, marking a 6.4 percent improvement from last year. Meanwhile, one-quarter of survey takers purchased a LivingSocial deal, up 13.6 percent from 2011. Despite this growth, the number of consumers subscribed to daily deal sites declined from 65 percent to 60 percent, suggesting that Groupon and LivingSocial are forcing their competitors out of the market.
Marketing is only one part of successfully managing a retail brand. Maximizing store operations requires a mix of advertising, customer service and business know-how.
