There is always a lot of talk about Groupon and Living Social and all of the daily deal websites that seem to be popping up. But is it a valuable tool for marketing your website? Personally, I am still on the fence about the effectiveness, but this study by Rice University is making it clear that this business model may be over rated.
The study, done by Utpal Dholakia, a professor of management at Rice University found that fewer than half of companies that have used the service are unlikely to do so a second time. That alone speaks volumes to me.
He also found that 80% of coupon users are first-timers and that less than 20%of them become repeat customers that return for full purchases. Only 36% spent beyond the deal’s face value.
21.7% of consumers never redeem vouchers and 26.6% of businesses reported that they lost money on their deal.
Dholakia surveyed 324 businesses that offered deals from August 2009 to March 2011 from 5 coupon services including Groupon. Living Social, Open Table, BuywithMe and TravelZoo.
I know there are a couple of 2 Dogs Design clients that have tried Groupon and we hope to be able to post their results in a future blog post.