Consumer Demand Will Sustain Deals

I just finished giving a presentation on daily deals to a group of DQ providers (directory assistance) in Prague at the EIDQ trade meeting. The title of my talk was “The Group Buying Explosion, Will It Last?” Many of the people in the room were highly skeptical of the phenomenon at the start of the talk.

Most countries in Europe don’t have the history of paper coupons that exists in the US and so culturally they’re predisposed to be skeptical about this seemingly North American trend. But the desire to save money is universal (especially during a recession) and the capacity to deliver deals on mobile devices further improves the likelihood of adoption in Europe.

One estimate I saw asserted that there were nearly 900 deal providers in Europe. I did a reality check with some of the people at the conference and the real number appears to be half or slightly less than half that figure.

A big chunk of my talk, which immediately followed the vivacious Andrew Shotland on Panda, was about the consumer behavior/demand side of the deals equation. There are tons of data that support the proposition that consumers love deals — and it’s the preferred form of mobile advertising. This single truth will sustain the deals segment, even as it evolves more merchant-friendly policies and practices.

Among the numerous stats I cited were the following:

  • Coupons/deals are the preferred form of mobile advertising (by consumers)
  • 53% of adults said they use more deals and coupons than last year
  • 60% of consumers use coupons/deals at least once per wk
  • 63% percent will search 2 to 10 different coupon sources weekly; 11% search more than 10 sources
  • 80% likely to select next vacation destination based on existence of coupon/deal
  • 162% growth for coupon sites in Europe (2009 to 2010)

A few of the data points above and that I used came from a new Borrell survey of 40K consumers (yes, you heard that right) and just over 729 SMB advertisers. The survey has lots of great information. Below are several nuggets from the data.

Consumers have registered for average of 3.6 daily deal emails. And the average number of deals purchased in past 6 mos is 4.4, according to the Borrell survey. Consumers receive deal emails daily but the majority would rather get them weekly.

Source: Borrell Associates

The Borrell data also confirm that there is some shifting of budget for a meaningful number of advertisers from other media into deals/coupons.

Source: Borrell Associates

This is generally consistent with June 2011 findings from Rice about budget shifting away from traditional media toward digital generally and deals in particular.

Borrell also found that 48% of merchants would repeat a daily deal. This number is somewhat higher but in line with three other surveys (including one we did) that average out to 44.6% saying they would use daily deals again.

Finally here are the top deal categories by consumer interest, coming out of the Borrell survey:

Source: Borrell Associates

Related: Yipit tracks significant revenue growth for deals market in September.

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5 Responses to “Consumer Demand Will Sustain Deals”

  1. Andrea James says at

    I was originally pretty skeptical too, given the disaster stories we have heard..

    But a number of the small business owners we have spoken to said that daily deals have been the most effective form of advertising for them so far. They previously found that it was difficult to get any attention, didn’t know how to reach new customers and to be given a chance to demonstrate that their services are great. This was especially the case when they were fairly new businesses.
    Good businesses, when given a chance to show first hand that their services are better or special, are growing. And those that supported their deals with sound marketing processes have done even better. 

    Their retention rates were nowhere near what is suggested from some of the articles in the media but nevertheless they found daily deals useful.  

  2. Greg says at

    And I think there’s lots of refinement to come on the merchant side. But deals are proving effective for many SMBs and the “no money down” aspect is enormously appealing. However it’s the consumer demand that will remain the constant in this market — even though “deal fatigue” also exists.

  3. Andrea James says at

    Yes, I agree that there is still much room for refinement. 

    As a consumer, I suffered deal fatigue a little while ago. Then again I was one of the early adopters. It’s possible that if I were not working to help businesses to improve their deals, I wouldn’t be opening emails about deals much at all.

    Back to the point of refinement that you mentioned, now that there are so many deal sites, so many merchants (and so many apps and aggregators even!), the smallest businesses are once again faced with the challenge of getting attention and attracting good customers.

    So yes, in many ways this space needs to evolve to keep consumers (besides the extreme couponers) interested, give SMBs an opportunity at having sustainable businesses and offer all parties value and credibility.  

  4. Greg says at

    If you look at Groupon’s numbers as a kind of proxy for the entire segment you see how much room for growth there is:

    116M email subs vs. only 23M buyers
    78K merchants

    Borrell’s survey data shows that about 19% of SMBs have tried deals. Our earlier survey had a smaller figure, about 10%.

    So on both the merchant and consumer sides there’s still considerable “headroom.”

  5. Andrea James says at

    Yes! I had to remind myself of this lately, or rather keep reminding myself! 🙂

    Because I tried as a consumer almost as soon as it came out and because I read so many tech and business articles, blogs, research etc. everyday, it often feels like EVERYONE has been there and done it and is tired as can be about the whole thing. (How many more Groupon IPO stories are we going to see? Sigh.)

    It was only when I started speaking more regularly to people outside of my immediate circle did I realise how a lot of people only had a vague, peripheral knowledge about it/never actively participated either as a merchant or consumer.

    And also how some merchants were keen to keep going back and improving their deals each time.

    So it’s good to bear in mind what you’ve just said about how shallow the market still is.

  6. Are Deal Sites Pursuing a Policy of Price Manipulation? says at

    […] made the case at the recent EIDQ conference in Prague that consumer demand for deals was a kind of unshakable foundation that would ensure the continuation of the deals business over […]

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