While most businesses that have run daily-deal offers with operators like Groupon and LivingSocial say they’re satisfied with the experience, more than half say they aren’t planning to run another offer in the next six months, according to a new report.
Investment firm Susquehanna Financial Group and daily deal aggregator Yipit spoke with 100 owners of restaurants, spas, home and auto services, and sports and fitness venues to gauge their satisfaction with marketing their businesses online through daily-deal operators. 80% of the respondents say they were satisfied with the experience.
45% of respondents say the daily deal offer generated new customers and 26% that deals provided a better way to advertise their business, as opposed to more traditional advertising channels like newspapers and the Yellow Pages.
But daily deals are a mixed blessing, respondents say. Only 10% of the merchants say their daily-deal offers contributed to strong revenue growth. The low percentage is likely due to the large discounts merchants offer, usually at least 50%, combined with the daily deal operators’ commissions, which can range as high as 50%. 26% of the merchants say high discounting is a key concern and 20% say they are concerned about the low numbers of customers who returned after redeeming a discount voucher.
Those concerns help explain why 52% of the merchants in the survey say they do not plan to run another offer in the next six months. The report says many merchants use offers during slow months and may foresee sufficient demand in the short term that they don’t need to repeat the offers. 24% of merchants say they plan to run one daily deal offer in the next six months, and 23% plan to feature two or more.
“The success and sustainability of the daily-deal model will be ultimately based on the value that it is delivering to merchants, and while most are satisfied, there is still plenty of room for service improvements,” the report says.