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Daily-deal companies are
here to stay, according to consumers
New study by Rice and
Cornell researchers shows sustained interest in daily deals among consumers

BY AMY HODGES
Rice News staff

Despite recent news reports questioning the long-term
viability of daily-deal companies, a new study from researchers at Rice
University and Cornell University shows that the companies are more popular
than ever among consumers.

”The key finding is that there is no evidence of waning
interest among consumers of daily-deal promotions,” said Rice University’s Utpal
Dholakia, co-author of ”Daily Deal Fatigue or Unabated Enthusiasm?”
”In fact, the more deals purchased by an individual, the more enthusiastic they
seem to be.”

	UTPAL DHOLAKIA

Dholakia, professor of management at Rice’s Jones Graduate
School of Business, and Sheryl Kimes, professor of hospitality management at
Cornell University, examined consumer perceptions of promotions for nine daily-deal
companies: Groupon, LivingSocial, Travelzoo, Gilt City, OpenTable, BuyWithMe,
ScoutMob, eversave and Restaurants.com. The researchers surveyed 973
respondents in August; 655 were daily-deal users and 318 were not.

Dholakia said the study is good news for daily-deal
companies, who have been hit hard in recent weeks with reports of the
industry’s decline. Even previous research by Dholakia found that not enough
businesses are coming back to daily deals to make the industry sustainable over
a long time.

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,” Dholakia said.

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 do not think about spending issues all
the time. 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 said.

The study brings into question one of the basic beliefs
held by most in the daily-deal industry. ”There is a theory that consumers must
be offered ‘deep’ discounts (50 percent or more) to be interested in daily
deals,” Dholakia said. ”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.”

The study was funded by the Cornell Center for Hospitality
Research and Rice University.

To read the complete new study and previous research
papers by Dholakia on daily-deal sites, visit www.ruf.rice.edu/~dholakia.