Daily Deal Sites Are Hot and a Challenge
June 30, 2011
CNN Money’s article “Study Offers Grim News on Deal Sites Like Groupon” caused me to do some thinking about online deal sites. I know that some of the goslings follow the offers on Groupon and LivingSocial. I write a couple of columns about online marketing options and included deal sites in my recommendations. I was skeptical about some of the business models. With many companies jumping into the sector, I am not sure which approach will win and which will lose.
The write up called my attention to some research conducted by Rice University. One surprising finding for me was that the deal toboggan may be reaching the finish line. The study, by Utpal Dholakia, professor of management at Rice University, found that nearly 80 percent of coupon users are first-timers, and only 20 percent of them become repeat customers of businesses offering deals through services like Groupon, LivingSocial and OpenTable. . . .
The article said:
Theoretically, many customers will either spend beyond the deal offer or return for more business. But Dholakia found that just 36 percent of customers buy goods or services beyond what was offered in the deal. Worse, less than 20 percent return to the business for full-price purchases.
If true, does the study predict bad news for a field poised to fill with new competitors, including behemoths like Facebook and Amazon. In light of these findings, business clients are likely to either bail altogether or demand the deal sites take a smaller slice of the revenue. I am not sure Web search will regain is zip. This means that those wanting to sell online will have to put on their thinking caps. Easy to say but tough to do in a faltering economy. So much depends on a Google, filled with ads beside the hungry merchants. (Apologies to William Carlos Williams.)
Cynthia Murrell, June 30, 2011
From the leader in next-generation analysis of search and content processing, Beyond Search.