Daily-deal sites, such as Groupon and Living Social, which offer deep discounts on products and services, continue to be a viable means of getting new customers, according to a study from Rice University—and health-service providers like massage therapists are among the types of businesses that have the greatest daily-deal success.
In the study, “How Businesses Fare With Daily Deals As They Gain Experience: A Multi-Time Period Study of Daily Deal Performance,” researchers examined performance of daily deals using survey data from 641 small- and medium-sized businesses, according to a university press release.
“Overall, the results find little or no evidence of deterioration in the performance of daily deal promotions over the past year or as the business operator runs multiple daily deals,” researcher Utpal Dholakia said. “Rather, there is improvement on some metrics.”
Key findings from study show:
1. The likelihood of enjoying profitable promotions is associated positively with the business’s experience; while less than half of the businesses running their first daily deal report profitable promotions, three-quarters of those running seven or more deals report profits from these promotions.
2. Daily deals are just as likely to be successful for both businesses that don’t do any marketing and those that spend heavily on marketing.
3. Almost 80 percent of daily-deal patrons are new customers, even for businesses running their seventh, or higher, daily deal, and businesses continue to see equally stable conversion rates for both repeat purchasing and spending beyond deal value.
4. Daily deals appear to be sustainable programs for approximately 30 percent of businesses. Newer and relatively smaller businesses have even higher sustainability rates of close to 40 percent.
5. Photographers (with a 75 percent rate of profitable daily deals), health and fitness services (69.3 percent), tourism-related services (68 percent), and doctors and dentists (66.7 percent) have significantly higher rates of daily deal success, while cleaning services (27.3 percent), restaurants and bars (44.2 percent), and retailers (50 percent) fare relatively poorly.
6. Daily deals appear to be more sustainable for newer and smaller businesses. Businesses founded within the past six years had a 39 percent retention rate after seven deals compared with a 23 percent retention rate for older, well-established businesses. Smaller businesses with annual revenue below $500,000 enjoyed a 41 percent retention rate compared with larger businesses, which had a 15 percent retention rate.