Daily deal companies are here to stay, according to consumers

Sep 14, 2011

Despite recent news reports questioning the long-term viability of daily deal companies, a new study from researchers at Rice University and Cornell University shows that the companies are more popular than ever among consumers.

"The key finding is that there is no evidence of waning interest among consumers of ," said Rice University's Utpal Dholakia, co-author of "Daily Deal or Unabated Enthusiasm?" "In fact, the more deals purchased by an individual, the more enthusiastic they seem to be."

Dholakia, professor of management at Rice University's Jones Graduate School of Business, and Sheryl Kimes, professor of at Cornell University, examined consumer perceptions of daily deal promotions. The researchers surveyed 973 respondents in August; 655 were daily deal users and 318 were not.

Dholakia said the study is good news for daily deal companies, who have been hit hard in recent weeks with reports of the industry's . Even previous research by Dholakia found that not enough businesses are coming back to daily deals to make the industry sustainable over a long time.

The new study shows significant opportunity for growth among consumers, as only 16.7 percent of the research panel's population has used daily deals before, and the majority of non-users (90.6 percent) haven't bought a deal because of awareness or access issues.

"We see significant further opportunity for trial and use of daily deals by current non-users," Dholakia said.

Overall, daily deal customers tend to have little interest in being seen as different or "fringe" in their shopping patterns, are not very careful with their and do not think about spending issues all the time. They are interested in trying new products and services to have new experiences to talk about and influence others. They are attracted to a deal because it is a deal, and are likely to be less sensitive to the actual terms of the offer made by the merchant.

"All of these psychological characteristics indicate that the underlying motivations for purchasing daily deals are complex and multifaceted, having to do with more than just saving money," Dholakia said.

The study brings into question one of the basic beliefs held by most in the daily deal industry. "There is a theory that consumers must be offered 'deep' discounts (50 percent or more) to be interested in daily deals," Dholakia said. "Our research shows that a significant number of will continue to buy the deals even if the discounts are slightly smaller. This is a significant finding because my previous research showed that businesses find huge discounts to be unsustainable. The industry seems to be operating under the opinion that deep discounts are the only way to be successful, but that's not the case."

Explore further: The significance of digits: just how reliable are reported numbers?

More information: To read the complete new study and previous research papers by Dholakia on daily deal sites, visit www.ruf.rice.edu/~dholakia/

add to favorites email to friend print save as pdf

Related Stories

Forecast: Tough times ahead for daily deal sites

Jun 14, 2011

Over the next few years, it is likely that daily deal sites will have to settle for lower shares of revenues from businesses compared with their current levels, and it will be harder and more expensive for them to find viable ...

Yelp testing 1-day sales of local coupons

Aug 27, 2010

(AP) -- Review website Yelp said Thursday that it is testing out "Yelp Deals" - large discounts at local businesses that site users can buy on one day only.

Amazon invests $175M in Groupon competitor

Dec 03, 2010

(AP) -- Amazon.com Inc. said Thursday that it invested $175 million in social coupon service LivingSocial - the latest sign that the online retailer is delving into promising new methods of e-commerce.

Recommended for you

Consumer sentiment brightens holiday spending

11 hours ago

Consumer confidence posted its fourth consecutive monthly gain in November, rising to its highest level since July 2007, according to the Thomson Reuters/University of Michigan Surveys of Consumers.

Over-identifying restrictions in economic analysis

Nov 25, 2014

The analysis of empirical economics has long made use of a tool called the generalized method of moments (GMM). This method is used as a generic way of estimating parameters in an empirical model where the ...

User comments : 0

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.