grouponEven when local merchants make money, many remain unhappy with deals

The long-term profitability of participating in daily deal promotions remains an open question for local businesses, even as services like Groupon remain popular and more businesses jump on board with deal offers.

July research from UK-based Cooper Murphy Copywriters found that nearly two-thirds of US businesses that had run a Groupon promotion said the particular promotion had been profitable for them. While a few were unsure, only 35% said they did not make money off the deal itself—an early worry among many businesses due to the deep discounting offered for such programs.

Yet businesses remained unsatisfied. Fully 82% were unhappy with the level of repeat business their Groupon promotion brought in, and nearly as many said Groupon users were more price-sensitive than the average customer.

Satisfaction with the Level of Repeat Business After Running a Groupon Promotion According to US Local Businesses, July 2011 (% of respondents)

In the end, a slight plurality of respondents said they would not advertise with Groupon again.

US Local Businesses that Would Advertise with Groupon Again, July 2011 (% of respondents)

Other research into merchant satisfaction with daily deals has indicated a similar ambivalence. According to a Rice University study, businesses reported that as of May 2011 just 20.4% of customers who came in because of a Groupon offer became repeat visitors, and that less than half of the businesses were interested in another such promotion. But consumer-based research from ConsumerSearch.com and The About Group found that more than two-thirds of daily deal users said they returned to businesses at which they had previously redeemed a deal.

These stats do not necessarily disagree. Consumers polled about their behavior indicate they returned to at least one business after using a daily deal, but may have redeemed many other deals at businesses they never returned to.

Furthermore, many merchants are satisfied with the level of business daily deals bring in; a MerchantCircle survey of small businesses found that, contrary to the Cooper Murphy study, 77% of them would run another daily deal promotion after their first experience.

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