Academic journal article The Qualitative Report

Consumers' Motivations and Daily Deal Promotions

Academic journal article The Qualitative Report

Consumers' Motivations and Daily Deal Promotions

Article excerpt

Introduction

The daily deal promotions have emerged as a new trend along with the increase of e-commerce and despite (or probably thanks to) the economic crisis started in 2008. At very discounted prices (usually 50% to 90% off), for a limited time (usually one or two days), the daily deal (dd) sites offer their subscribers a deal for a product or a service.

Groupon is the most popular and largest daily deal site, founded by Andrew Mason in Chicago in 2008. Thanks to a growing rate of 219% in a half year, in the first half of 2011 the total revenues were $688 million compared to $313 million in 2010, despite a net loss of $224 million in the first half of 2011 (Pepitone, 2011). According to The Archer Group (2011) dd sites count more than 500 and their numbers are still growing. In the US, besides Groupon, Living Social and Eversave are the best known and Groupalia and Lets Bonus in Italy.

As a new two-sided market, daily deals sport one side representing businesses offering discounted products or services; the other side representing customers interested in buying them; between the two the network benefits from the intermediation of the dd site. Theoretically, the coupon sales increase along with the growing of site subscribers, and, consequently, the merchants' benefits increase too (economies of scale). Clients benefit is proportional to the level of bargain obtained (number, quality, and convenience of the deals); the merchants and the dd site share profits from the sale of coupons in a variable percentage: for instance, Groupon's commission is 50% of the coupon price, but other dd sites ask for less (i.e., the share of LivingSocial is about 35%). Even if the earnings of dd sites and those of the merchants are proportional to the sold coupons, the merchants should take into account the difficulties met in satisfying a higher number of clients. Thus leading the service providers to offer a lesser quality service and consequently dissatisfy the clients. Different motivations encourage merchants in joining dd sites: attracting new customers, increasing traffic to their points of sale, benefitting from word-of-mouth, gaining popularity, and increasing sell-out. DD promotions are a new marketing tool that is cheaper than advertising and fostered by group buying strategies and geo marketing tactics.

Groupon subscribers' base has doubled in 2011, reaching 115 million users in the world (The Archer Group, 2011), thus testifying the success of the phenomenon. Moreover, according to BIA/Kelsey (www.biakelsey.com), in the US in 2011, daily deal sites would earn $1.25 billion and their revenues would increase between $3.9 billion and $6.0 billion by 2015. But these figures probably were underestimated since Groupon only in 2011 has collected revenues of $688 million.

Articles in newspapers and magazines testify the worldwide success of dd sites, in spite of an almost complete absence of academic research on this topic. Hence, the paper identifies an under-researched area of e-consumer behavior in a marketing context. Thus the specific aim is to understand the consumers' drivers in online coupon buying. The paper presents the results of a qualitative research conducted on Italian daily deal users aimed at understanding

1) the daily deal concept for Italian consumers;

2) the level of awareness;

3) the perceptive area;

4) the social dimension;

5) the consumer behavior;

6) relationship with e-commerce.

The paper is organized as follows: the second section holds a review of the existing literature on online consumer behavior and daily deal promotions; the third section focuses on data about e-commerce and daily deals worldwide, in Europe, and in Italy; the forth section defines the objectives of the study and the applied methodology; the fifth section reports the main results of the empirical research (online focus groups) on daily deal users in Italy, and the last section draws some conclusions. …

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