Is Daily Deals Effective for Dinning?
What’s Working and Prospect of daily deals
When daily deals emerged during the recession, the new couponing approach—based on group buy-ins to unlock deep discounts—seemed like a boon to struggling restaurateurs and bargain-hungry customers alike.
The economy, if not exactly humming like a top, has left the worst of the recession behind. But even as it recovers, daily deals have not ebbed; rather, they have become a fixture in the restaurant industry.
This report provides an overview of consumer attitudes toward daily deals and the types of offers they want. The report also looks at daily deals from the restaurants’ perspective: what’s working, what’s not working and what’s coming next.
Competition is appearing from all corners: Payment apps like Google Wallet, Square Wallet and LevelUp are integrating loyalty programs and have the capacity to personalize coupons, and bank-linked products like BankAmeriDeals, AmEx Sync and Visa Offers can also offer deals based on purchase history.
Meanwhile, the two leaders in the space—Groupon, with 61% of North American market share, and LivingSocial, with 17%, according to a Q1 2013 analysis from daily deal aggregator Yipit—continue to diversify. Groupon has taken on Square Wallet with the introduction of Breadcrumb, its new point-of-sale platform, and LivingSocial has moved into events and ticketing.
Deal-centric consumers will always be a consideration for restaurant marketers. The question now is how to satisfy them while preserving margins, and whether this can be achieved through established means or by exploring new ways to discount and build loyalty.
CUSTOMERS: ECONOMICAL AS EVER
The height of the recession may be over, but customers are still price sensitive when it comes to making a purchase.
In a November 2012 survey, market researcher Mintel found that 71% of customers were motivated to select restaurants based on coupons or special pricing. In another survey from consulting firm AlixPartners, coupons and discounts were also the leading money-saving tactics cited by consumers; 74% sought out dining deals “frequently or occasionally” and chose restaurants based on deals offered. Respondents also said they would eat out more frequently in 2013, but AlixPartners projected that average spend per meal would be down 4.7% to $12.85 for this year.
Interest levels in promotions haven’t changed radically since 2009, when the economy was practically frozen in the wake of the financial crisis. Consumer surveys from Technomic in June 2009 and March 2013 showed remarkably similar attitudes among US internet users about restaurant deals. Respondents had less interest in dollar menus, but buy one, get one deals continued to be a major draw to visit or order from a restaurant.
Pricing continues to be an important issue for consumers. A March 2013 survey from Market Force Information found that slightly more than half of consumers who had tried a new restaurant in the past 90 days expressed dissatisfaction with the experience; the most common reason cited, at 20.5%, was the price was too high for the quality of food.
According to a survey from AYTM Market Research, 38.2% of US internet users subscribed to at least one daily deal in March 2013, down from 45.3% in September 2011. But sign-ups don’t equal conversions, of course; the majority of respondents rarely purchased the deals arriving in their email inbox. But roughly one-third cited making regular purchases.