RICE U. (US) — Rumors of the demise of daily deal companies are greatly exaggerated according to a new study that finds they are more popular that ever with consumers.
“The key finding is that there is no evidence of waning interest among consumers of daily deal promotions,” says Utpal Dholakia, professor of management at Rice University. “In fact, the more deals purchased by an individual, the more enthusiastic they seem to be.”
For a new study published by the Social Sciences Research Network, Dholakia and co-author Sheryl Kimes, professor of hospitality management at Cornell University, examined consumer perceptions of daily deal promotions, surveying 973 respondents—655 who were daily deal users and 318 who were not.
The study is good news for daily deal companies that have been hit hard with reports of the industry’s decline. Even previous research by Dholakia found that not enough businesses are returning to daily deal sites to make the industry sustainable over a long period.
The new study shows significant opportunity for growth among consumers, as only 16.7 percent of the research panel’s population has used daily deals before, and the majority of non-users (90.6 percent) haven’t bought a deal because of awareness or access issues.
“We see significant further opportunity for trial and use of daily deals by current non-users,” says Dholakia.
Overall, daily deal customers tend to have little interest in being seen as different or “fringe” in their shopping patterns, are not very careful with their personal finances, and don’t think constantly about spending issues.
They are interested in trying new products and services to have new experiences to talk about and influence others. They are attracted to a deal because it is a deal, and are likely to be less sensitive to the actual terms of the offer made by the merchant.
“All of these psychological characteristics indicate that the underlying motivations for purchasing daily deals are complex and multifaceted, having to do with more than just saving money,” Dholakia says.
The study questions the importance of deep discounts of 50 percent or more, Dholakia says.
“Our research shows that a significant number of consumers will continue to buy the deals even if the discounts are slightly smaller. This is a significant finding because my previous research showed that businesses find huge discounts to be unsustainable.
“The industry seems to be operating under the opinion that deep discounts are the only way to be successful, but that’s not the case.”
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