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Extent of deal sites' benefits to businesses is unclear

CHICAGO — Are Groupon and its many imitators here to stay or a flash in the pan? One recent survey provides interesting ammunition for both sides of the debate.

ForeSee Results, a customer satisfaction researcher based in Ann Arbor, Mich., polled 22,000 online shoppers this past spring and found that while usage among deal sites like Chicago-based Groupon and Living Social is strong, it is less clear how much new business their deep-discount coupons are driving to their clients.

Two-thirds of the survey respondents said they use at least one of the deal sites and about half of those subscribe to two or more. Groupon, not surprisingly, had a 51 percent share among these users, followed by Living Social with 24 percent, Google's Offers with 14 percent, Woot with 10 percent, and all others with 7 percent.

About 60 percent of the subscribers, regardless of the site, also said they had purchased deals within the previous 90 days. About half said they had used more than one deal over the same time period, and a slightly more than a third said they had used at least one deal. About 11 percent said they had yet to use an offer.

Larry Freed, ForeSee's president, suggested in his blog that these data are good news for the deal sites (none of which are ForeSee clients) and bodes well for the sustainability of the business model. But other data aren't as demonstrative.

Are Groupon and the other sites helping businesses attract and retain new customers or are they merely giving existing customers deep discounts for goods and services they might have purchased anyway?

The survey showed that 38 percent of respondents are frequent customers of the businesses for which they buy coupons.

This suggests using Groupon or similar sites may simply be eroding their margins, not driving new business, Freed said.

At the same time, about a third of the respondents said they were new customers of the businesses, and 27 percent said they were infrequent customers.

"That's at least 35 percent and arguably 62 percent of deal buyers that represent new business," Freed said.

He noted that none of this matters if the business that attracts a customer fails to use the opportunity to convert them into loyal buyers. ForeSee's survey didn't address that question but will in the future, Freed said.

Extent of deal sites' benefits to businesses is unclear 06/22/11 [Last modified: Wednesday, June 22, 2011 9:47pm]
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