Consumer interest in daily deals is driving retailers to invest in group deals due to their convenience and high ROI rate. According to new marketing trends data from MerchantCircle’s seventh survey of small business owners in the U.S., three-fourths of respondents who offered a group deal in the past said they would offer another in the future. As of December 2011, approximately 12% of local merchants had offered a daily deal, a 33% increase from MerchantCircle’s June 2011 survey.
Based on survey results, the top three most important criteria for selecting a deals provider include: cost (64%); local targeting (57%); and the ability to reach a large audience (52%). The ability to reach a large audience was equally as important as cost (both at 62%) for businesses planning to release deals via Groupon.
Group deal services vary in terms and conditions, according to Darren Waddell, Executive Vice President of Product and Marketing for Reply! Inc., the parent company of MerchantCircle.com. “It’s important that local merchants shop carefully for a deal service provider and examine companies’ various stipulations to assure the one selected best meets the retailer’s business objectives.”
Overall, 75% of the local merchants already investing in daily deal sites are reaping the benefits by acquiring new customers and negotiating a deal structure that generates profit. While approximately 20% of respondents agreed to use daily deal sites again due to competitors’ interest in doing so, 25% indicated they would not release another offer because of their previous experience.
Waddell offered a five-step process for local merchants seeking an effective deal strategy:
- Identify your goals;
- Select a provider that best meets your business goals;
- Do the math ahead of time to understand the costs associated with the deal;
- Ensure you are set up to service increased demand efficiently; and
- Have a game plan for turning new customers into repeat customers, such as offering an immediate upsell or other special discount, or suggesting they sign up for your newsletter and follow you on Facebook and Twitter.
Google Offers Gains Momentum, Facebook Ads Remains Strong
A variety of specialized deal providers have entered the group deals market, including Google Offers, Groupon and LivingSocial. The MerchantCircle survey showed that despite the popularity of these outlets, Google Offers has the highest retention rate of all deal providers. In fact, 66% of Google Offers’ customers plan to use its service again. Fewer respondents (41%) said they would partner with Groupon and LivingSocial.
“Google has done a remarkable job parlaying its large local merchant base into customers for Google Offers, and the company has quickly become a formidable challenger to Groupon and LivingSocial in this space,” said Waddell.
Waddell predicts Google’s name brand and reach will be a huge threat to other “pure-play” deal providers: “Our data shows that many businesses already are using Google Offers and even more plan to try the service in 2012,” said Waddell. “Just as we saw with Facebook, which grew Facebook Ads to more than 20% adoption in a matter of months, marketing service providers that have existing relationships with local merchants are very well-positioned to introduce new online marketing services to this audience.”
Though Facebook did not gain success with its Facebook Deals offering, Facebook Ads is driving traction: approximately 23% of local merchants have tried Facebook Ads. In addition, Facebook Ads has noted a 5% increase in the amount of new users within a year. Favorability for Facebook Ads remains strong among those who have tried it, with 62% saying they would use Facebook Ads again, citing ease of use (62%) and the ability to start and stop campaigns (55%) as the top reasons for continuing, according to the study. General marketing on the social networking site remains of high interest among local merchants: the number of companies tapping into the web site for marketing purposes increased from 66% in June 2011 to 70% in November 2011.