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LivingSocial Reacts to Recent Studies about Daily Deals

Company remains focused on local commerce

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A couple of recent studies brought out some interesting, but contradictory data pertaining to daily deals’ providers. The first study from Rice University found that the business model behind daily deals’ sites was unsustainable and predicted “tough times ahead for daily deal sites.”

The study specifically examined Groupon, LivingSocial, OpenTable, Travelzoo and BuyWithMe. If you remember, the New York Times questioned Groupon’s business model in a report earlier this year as well.

“The major take-away from the study is that not enough businesses are coming back to daily deals to make the industry sustainable in the long run,” said Utpal Dholakia, an Associate Professor of Management at Rice University. “And our results from three studies and close to 500 businesses surveyed show that the deals are nowhere close to the rates of financial success for participating businesses that some companies claim to be having.”

Interestingly, a second study was released even more recently that revealed just the opposite. The study from ForeSee Results found that new customers were, in fact, coming in and purchasing offers through daily deals’ sites, namely LivingSocial and Groupon.

Larry Freed, the President and CEO of ForeSee Results, wrote this regarding their findings, “31%, are brand new business (new customers who weren’t aware of the company before the deal plus those with some brand awareness), 27% were infrequent customers, and 4% were former customers. That’s at least 35% and arguably 62% of deal buyers that represent NEW business.  This is compelling data, and these are the customers that provide what the daily deal model is supposed to provide: bringing you new customers to try your business or products out.” (No emphasis added).

Needless to say, these studies have resulted in some confusion in the industry. Should merchants and consumers put their trust in Rice University, ForeSee Results, or neither?

What do these studies tell you about the daily deals industry? We’d love to know your thoughts.

In hopes of clearing up some of the confusion, WebProNews reached out to Maire Griffin of LivingSocial. According to her, the studies help to enforce checks and balances on the industry, but they don’t dictate what the real goals of LivingSocial are.

When we spoke to Aaron Batalion, co-founder and CTO of LivingSocial, earlier this year, he pointed out that LivingSocial’s focus was on “local commerce” and not daily deals. Griffin spoke further to this point and said that the company worked with merchants on an individual level to create deals that not only encourage consumers to buy, but that would also help move the merchant’s business forward.

“We’re confident in what we’re putting together for all local merchants in all of our different product sections,” she added.

She also brought up another important point regarding LivingSocial’s approach. She said, “Daily deals are an important part of our business, and they will continue to be an important part of our business; but one thing that LivingSocial is really great at is innovating our products… our different lines, be it Families, Instants, Escapes, build on what we know and we’ve really perfected from a daily deals’ perspective to help more and different kinds of merchants all around the globe.”

Even though Rice University’s study shed some pessimism on the future of daily deal’ providers, it found that 83 percent of LivingSocial’s customers were new customers. Griffin told us that internal data from LivingSocial shows a similar high influx of new customers and also an increasing number of secured relationships between the company and its merchants.

“Our tremendous growth has really reinforced that we are putting the right steps in place,” she said. “We really believe in creating relationships with our merchants; that’s why we have actual employees in every single one of our markets, so we can learn that merchant’s business.

In terms of the overall space, she additionally stated, “The industry has proven that it is good for local businesses.”

Do you agree with LivingSocial and believe that daily deals are beneficial to local businesses?

LivingSocial Reacts to Recent Studies about Daily Deals
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  • http://www.thedailydealbrokers.com Andrea McCracken

    Daily deals, like other industries, will evolve. There will always be a demand for discounts. The change will come in what the people want discounts on and what they will buy.

    • http://www.rockit.me Roger

      In a recession bargain hunters never go back to a business and pay full price after getting a discount unless they get another discount.

  • http://www.localdealsites.com Cogrep

    I’ve seen mixed reviews on whether the daily deal sites generate one-time deal seekers or long term customers… I have too assume more of the former, but I’ve used many Groupons and none of the merchants have attempted to retain me as a customer by collecting email, mobile number, offering another coupon, etc. That seems par for the course with most businesses even outside of Groupon, but if businesses are using Groupon as a means for new customer acquisition, then they should be even MORE focused on doing something to bring those customers back in. Very few business have a product/service that is so great that deal-seeking customers are anxious to come back at full price. Businesses need to make more of an effort to reap the benefits of their investment in Groupon advertising.

    I started LocalDealSites.com as a directory of daily deal sites. I have over 159 local deal sites and you can filter the list by city. http://www.localdealsites.com/

  • http://DailyDealMedia.com Don Young Jr.

    Well done Abby. I have posted several articles on the DailyDealMedia website discussing both points of view. I think what sometimes gets forgotten is that “daily deals” have been around since WAY before you or I were born. Some merchants will be successful and some won’t, that’s just the nature of commerce. The ONLY difference now is that via the internet you are able to MASS market. In theory, this should increase customer traffic. Will those merchants get scammers – complaints – customers that DON’T buy additional goods or services ? Of course they will. I don’t know of a sustainable business that already doesn’t have to deal with that, our own government included. .

    • Tom Clarke

      You have got to be kidding!
      The DD business plan is a disaster:
      1. Bargain Hunters
      2. No repeat customers
      3. 75% Discount
      4. Only marginal businesses participating: yoga, spa, skydiving, salons, nail and ethnic restaurants.
      5. Desperate businesses (soon to be gone)
      6. Profit margins decreasing
      7. 900 competitors
      8. Google and Facebook
      9. 800 million in the pockets of the investors already

      The future is real bright!

      • http://www.rockit.me Roger

        BRilliantly said!!! Customer Loyalty is what businesses should focus on. If you offer discounts give them to your loyal customers and the friends of your loyal customers and NEVER to strangers.

  • http://thewebsensesolution.com Jon

    Speaking to local businesses in my area who use smaller local groupon clones, they are selling a lot of 10 or more discounts at a huge reduction, and banking on people not redeeming the coupons. Funny enough, most people here locally do not redeem the coupons. This says two things to me. 1) People will stop buying local deals “soon” as they realize they aren’t getting value from them… or 2) Companies will stop offering local deals as conversions increase and they start losing too much money on the promotions.

  • dan

    A person I rent space with recently did a promotional like this. It is forcing me to rethink my own business, basically because she has been overwhelmed accepting these appointments, and will continue to be overwhelmed for at least the next 6 months. The company she used, though walked away with a giant check, and continued on to grab the next person willing to sell their soul. The only way my friend will profit is if she is able to get repeat clients. She is so busy trying to fulfill the steal she gave away, I don’t know how she will have the time or energy to do more appointments. We work as massage therapists, so there is a limit to how much work we can do. …and she can’t contract the work out, because it is too low, and no other therapist will work for that little.