Daily deals are not the best initiative for every small business. Since the rise in popularity of services like Groupon and LivingSocial, we've heard various stories from businesses slamming the model. Some small businesses have reported bad experiences running a daily deal - with some complaining about how it fails to turn a profit and others complaining that the daily deals model in and of itself is far from beneficial to the small business.
But, despite the occasional negative review, companies like Groupon and LivingSocial haven't fallen out of prominence. And new research from consumer analytics company ForeSee suggests that daily deals could help establish customer loyalty.
It's been one of the arguments for services like Groupon all along: If you get the customer in your store via daily deal, that can translate in repeat business. The thought is that a Groupon serves as a giant advertisement, and that outweighs any less-than-impressive profit margins for the actual deal itself.
ForeSee says that 91% of web shoppers reported either already making a purchase or planning on making a purchase with a particular small business after redeeming a daily deal.
ForeSee did find that from Spring 2011 to Holiday 2011, daily deal subscriptions were down overall:
Although overall subscription to daily deals is down slightly, Groupon subscribership remains healthy and commands the lion’s share of the market. We found that 52% of all respondents use Groupon – on par with 51% last spring. While only 30% use LivingSocial and 9% Woot, LivingSocial’s audience of subscribers has grown 6% since last spring and may still be on the rise. The 40% of people who don’t use any kind of special offer website could be viewed as a negative; however, since this is a relatively new and growing channel it could also simply mean that 40% of the market is still up for grabs
As you can see above, half of all respondents say they've bought a Groupon in the last 3 months and one-quarter say the same about LivingSocial. Nearly a third of the customers that used a daily deal at a merchant were first-time customers.
What is your experience with daily deals? Do you think they are a good or bad idea for small businesses? Let us know in the comments.