Groupon and Its Ilk Might Actually Be Good For Business


We’ve wondered before if daily deals were really all they’re cracked up to be.  The fairly young business model has garnered skepticism — do deal sites really bring in repeat customers for business?  Are they a valid marketing tool?  Overall, do they help or hurt their business partners?  Turns out the answers aren’t all bad.  A new study from the customer experience analytics firm ForeSee found, in fact, that daily deals sites do increase new business.

Hey, Groupon’s not doing too badly for the businesses with whom it partners. Graphic courtesy of ForeSee.

ForeSee’s data comes from a pool of 10,000 online consumers surveyed during the 2011 holiday shopping season.  The firm focused on daily deals’ two biggest players, Groupon and LivingSocial.  Of the percentage of shoppers — 38% — who’d bought and redeemed a deal at some point, a full 44% of them reported they’d already returned as a customer to the business from whom they’d purchased a coupon.  Meanwhile, in terms of marketing, 12% of daily deal purchasers said they’d never even heard of the business they were buying from before they bought the deal — so it seems Groupon is working, at least, to attract some new eyeballs.

If Groupon and its main competitor, LivingSocial, are doing decent business, what about smaller sites that offer pretty much the same model as their bigger, older cousins?  We’ve wondered before if and when they might start to disappear. ForeSee’s CEO, Larry Freed, has a few thoughts on what can help the littler guys survive, since “the main challenge is that Groupon is so dominant.”  He points out that “the smaller daily deal sites that have the best chance of success are those that cater to niche populations or product categories.  If smaller players can build a base of participating merchants and subscribers and then make it a top priority to satisfy both of those audiences, they certainly have a chance.  Most subscribers to other daily deal sites ALSO subscribe to Groupon, so unless you have a twist on the traditional model, it’s going to be a challenge.”

That said, since there seems to be positive value for everyone involved — business, consumers, and the daily deals providers — it might be a challenge worth meeting.  Ultimately, Freed says, “No one really knew what to expect when daily deal sites first came on the scene, but our research shows that these sites are no passing fad.”