Do Daily Deals Deliver?

by Maura Mitchell      

Marketers either rant or rave when I mention daily deals.  Phrases like ”money pit” and ”worst mistake I ever made” are interspersed with ”we got a lot of new customers” and ”I’m going to do it again.”

So what’s the truth about the effectiveness of Daily Deals?

The headline is if you’re in the right industry, at the right stage of brand development, and create the right offer, daily deals will build your business.  If you aren’t in the sweet spot, beware.

Let’s start with the positives.

• Daily deals build awareness. Roughly 90% of people who sign up for a deal site say it helps them discover retailers, products, and services they wouldn’t otherwise find.

• They attract new buyers.  Around 53% of people who purchased deals said they were first time buyers.

• Offers lead to incremental spending.  About one-third of buyers spend above and beyond the value of the deal itself when they redeem their voucher.

• Deal buyers make repeat purchases.  Depending on whose numbers you believe, 40 to 50% of people who first buy a product with a daily deal buy it again.

• There is some slippage.  Between 10% and 40% of vouchers purchased are never redeemed (I know that’s grasping for good news, but…).

There are quite a few negatives.

• At least a third to a half of deal buyers are already customers.  The specific percentage varies by category.  In fashion, that number is 80% (That’s not a typo.).

• Many voucher buyers would have purchased without a deal.  Overall, 51% say they would have paid full price if they hadn’t if they hadn’t seen the deal.  That number shoots up to 60% for clothing, shoes, and jewelry.  Ouch!

• Daily deals attract one time bargain seekers.  An estimated 30% of those who purchase a voucher never buy the product again. 

How can you increase your chances of getting results you like with a daily deal?

• Consider vouchers if you have low brand awareness and want to build it.  Consumers who sign up for deal sites are interested in learning about new products and services.

• Craft your offer so it is more interesting to first time buyers than loyal customers.  Make the voucher good for a starter kit, a one-time introductory event or a product that begs for a companion.  Reduce the price of the razor, not the razor blades. 

• Make it easy for consumers to spend more than the voucher value.  Discount appetizers, not full dinners.

• Consider short fuse offers.  You don’t want to peeve customers, but you may be able to generate good will and upsell if you correctly handle those who try to redeem vouchers after expiration.

• If you’re in the fashion industry, think twice before proceeding.  Then think again.  All the statistics I’ve seen show that daily deals for apparel and related categories are the most likely to convert full price current customers to deal buyers.

Do you have other thoughts about daily deals?  I’d love to hear them!

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