An often cited problem with Daily Deals it the heavy traffic effects that can overwhelm staff, and lead to an inferior customer experience. Consumers increasingly seem to be shopping via daily deals and buying for future consumption, creating a new “desk drawer” of pre-purchased products/service.
What are the redemption patterns of Daily Deals, and how is the consumption pattern trending? What are the real “breakage rates” – vouchers left unclaimed on expiration of the promotional offer?
by Benjamin G. Edelman, Sonia Jaffe, and Scott Duke Kominers
[Reprinted for our readers, from HBR Blogs with author's permission.]
Hundreds of websites like Groupon, LivingSocial, Eversave, and BuyWithMe sell discount vouchers for services ranging from restaurant meals and museum visits to spa treatments and skydiving. Best known is Chicago-based Groupon: although only two years old, Groupon touts a ten-digit valuation and purportedly rejected a $6 billion acquisition offer from Google.
To consumers, discount vouchers promise substantial savings — often 50% or more. To merchants, discount vouchers offer possible opportunities for price discrimination, exposure to new customers, online marketing, and “buzz.”
