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?

The chart below was taken from a seminar put on by Greg Sterling, in which Yipit presented their analysis of redemption patterns with Daily Deals. The data represents a sample of 30 active deals, where each plotted point highlights the deal redemption percentage and the number of days since the deal was offered. While the sample is small, it gives us a glimpse into redemption patterns.

from Yipit Presentation at Internet2Go Seminar 8-19-2010

Yipit’s commentary highlighted that approximately 20% of redemption occurred in the first month, and 15% in the last month.

The redemption pattern is surprisingly even in its distribution over the life of the promotional offer.  To some extent this result is calibrated by the service delivery constraints of appointment-based deals.  For instance, salons and personal services represent a large share of deal activity, and the pace of delivery/redemption is constrained by available appointments. Anecdotally, we’ve heard that in categories such as reservations the usage clusters heavily to the first 60 day period – what has your pattern been?

A recent commenter on GroupGro passed along some sage advice for appointment-based businesses in dealing with a new Daily Deal, paraphrased below:

• Add temporary worker to deal with burst in booking requests directly after the deal vouchers is released.
• Try to funnel customer inquiries into email, to help organize and optimize the labor effects,
• Consider using a unique telephone number for Deal reservations, to avoid the problem of requests harming existing service operations.

This is sage advice, and the kind businesses too often don’t seem to be receiving prior to scaled Daily Deal activities. You want the Daily Deal experience to lead to maximum return traffic, and the first impression you make with reservations and appointment personnel will surely impact this success rate.

Expiration and Breakage: Misunderstood Deal Terms

Every campaign has some level of non-redemption – users who do not use the voucher prior to the expiration.  Techcrunch, an industry publication, commented that  breakage at GroupOn was estimated to commonly be in the range of 10%. Other industry sources have come in closer to 15%.

The whole issue of redemption liability and business obligations will be the subject of a future post.