Group Deals Profitable and Effective For Local Merchants

New marketing trends data from MerchantCircle's 7th survey of small business owners across the U.S. reveals that Group deals are experiencing steady growth among local merchants. Nearly 12% of local merchants now report (December, 2011) having offered a daily deal, up 33% since the last MerchantCircle survey in June 2011.

About 75% of respondents say they would offer another deal in the future, 61% citing its effectiveness for customer acquisition as their top reason. Deal profitability is on the rise, with 37% saying solid profitability will lead them to offer another deal, up from just 24% in June. Among the 25% who said they wouldn’t offer another daily deal,

  • 42% said it was not effective for customer acquisition
  • 36% said it was too costly
  • 34% said they lost money on the deal

Key insights from MerchantCircle's research include:

Cost is the most important criteria for selecting a deals provider.

  • 64% cite cost as their top consideration when selecting a deals provider.  Local targeting (57%) and the ability to reach a large audience (52%) were the second and third-most important selection criteria
  • Businesses that plan to use Groupon in the future report that the ability to reach a large audience is equally as important to them as cost, with 62% citing reach and cost as key selection criteria

Groupon and LivingSocial may face increased pressure from Google Offers in 2012.

  • About 19% of local merchants who have offered a group deal have tried using Google Offers since its launch this summer, as compared to Groupon (26%) and LivingSocial (21%).  A large number of specialized deals providers have also entered the market; these services have been used by about 43% of local merchants who have offered a group deal
  • About 32% of merchants planning to use Google Offers for their next deals, as opposed to 26% who plan to use Groupon and 16% who plan to use LivingSocial
  • Google Offers enjoys the highest retention rate of all the large deals providers. 66% of its customers plan to use Google Offers again.  Just 41% of Groupon and LivingSocial customers report that they plan to use these services again
  • Before ceasing operations, Facebook Deals had been used by 22% of the respondents who’d offered a daily deal in the past.  53% of these customers say they plan to use Google Offers for their next deal

Facebook Ads growth slows among local merchants.

  • About 23% of local merchants report having tried Facebook Ads to date, which is only 5% more than six months ago
  • That being said, favorability for Facebook Ads remains strong among those who have tried them, 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
  • Of the 28% who say they wouldn’t use Facebook Ads again, 66% report that they didn’t acquire new customers. But more merchants now also cite high costs and low click-through rates as reasons not to advertise with Facebook again. 41% of merchants said the ads were too expensive (up from 35% in June) and 37% reported low click-through rates (up from 29% in June)
  • While Facebook Ads growth may have slowed, general Facebook marketing continues to be extremely popular among local merchants, with 70% of people using the social network for marketing, up from 66% in June

MerchantCircle is an online network of local business owners, combining social networking features with customizable web listings that allow local merchants to attract new customers.

For more information about this study, please visit MerchantCircle here.




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