- just a bit more than half (55.5%) of businesses recorded a profit after group buying promotion, more than quarter (26.5%) made losses and the rest broke even
- less than half of businesses that ran group buying promotion are going to do it in the future;
- almost 3/4 of merchants have no loyalty to group deal provider and ready to switch
So the conclusion that the researchers made is not very positive for group buying industry especially for websites that provide deals: the little loyalty, low rate of interest to repeat purchase from merchants and increasing competition will lead to the erosion of the current healthy margin and make the life of group deals providers harder.
The research collected data from 324 US businesses operating in 23 markets that used group buying promotion in 2009-2011.
Other interesting findings from the research:
- over 80% of deal users were new customers, however just around 20% were converted to repeat customers and 36% spent beyond deal’s face values;
- to make the deal profitable merchants should use higher face value, lower discount, limit the maximum number of deals and list shorter redemption period. In addition appeared that item based deals are more profitable than ‘dollar’ based deals;
- daily deals worked best for health and services and special events industries (over 70% of merchants reported profit). Two most popular categories of businesses – restaurants and spas experienced much lower success rate (43.6% and 53.7%) and only 53.7% of spas and 41.5% of restaurants are going to use daily deals in the future;
- businesses used 23.5% of their marketing budget for group buying promotions at expenses of more traditional media such as Yellow pages, print and direct mail
If you are working in the group buying industry or considering to run daily deal campaign it’s highly recommended to read the full research, it’s available at Professor Dholakia web page: http://www.ruf.rice.edu/~dholakia/