A new report from Rice University offers a number of very interesting findings and generally positive news for the daily deal industry. Based on surveys and interviews with 641 small businesses in late 2011 and 2012, it explores SMB attitudes and deal performance in a broad range of local business categories:
- Restaurants or bars
- Salons and spas
- Retailers (including store-fronts and online),
- Automotive services (repair and maintenance),
- Cleaning services,
- Doctors and dentists,
- Health and fitness services (e.g., yoga classes, gyms, fitness camps, outdoor activities, etc.),
- Education services (e.g., language classes, software training, etc.),
- Tourism-related services (tours, sight-seeing, etc.),
- Special events (concerts, shows, movie screenings, etc.),
- Photographers (including portrait, wedding and boudoir photography services)
The data are all presented in the aggregate and there are no data specific to any individual deal providers. Deal vendors are treated as a group. I’ll excerpt a number of the key findings, but you can download the full report from the link below.
The following chart indicates loyalty to a single daily deal site based on the number of deals offered. In other words, for the second deal just over half of SMBs used the same provider. The more deals issued the more likely multiple vendors were used by the majority of local businesses.
Rice found the greatest predictor of continued usage of daily deals, as one might expect, was whether the deal made money. As the chart below indicates, the number of SMBs making money with deals has increased (61.5%) since last year vs. those who lost money or broke even (38.6%).
The Rice report also found a positive correlation between deal experience (number of deals run) and profitability:
Whereas less than half of the businesses (45%) that have run their first daily deal report profitable promotions, more than three quarters of them (76%) do by the time they have run seven or more deals. The greater is the number of prior daily deals that the business has run, the higher is the likelihood that it will have a profitable daily deal
Another interesting and perhaps counterintuitive finding is that newer businesses tend to have more profitable deal experiences than older businesses, except the most established SMBs.
The was a similar distribution when Rice looked at deal profitability and firm revenues. The firms with $100K or less in annual revenue and those with $5 million or more had more profitable deals than those in the middle.
Deal profitability wasn’t at all correlated with marketing spend, however. In other words, firms that spent almost nothing on marketing were just as likely to have profitable daily deal experiences as firms that spent considerable amounts on marketing. That’s a curious finding because one would assume more sophisticated firms would have better deal experiences all other things being equal.
Finally the following chart indicates the percentage of businesses in the category that had profitable deal experiences. Photographers did the best, cleaning services and restaurants had the worst experiences with daily deals.
There’s a good deal more information and nuance in the full report, which can be downloaded here (.pdf)