Daily Deal Fatigue or Unabated Enthusiasm?

A Study of Consumer Perceptions of Daily Deal Promotions

Utpal M. Dholakia* Rice University

Sheryl E. Kimes Cornell University

This Version: September 11, 2011

* Utpal M. Dholakia is a professor of management at the Jones Graduate School of Business, Rice University and Sheryl E. Kimes is the Singapore Tourism Board Distinguished Professor of Asian Hospitality Management at the Cornell University School of Hotel Administration. The authors would like to thank the Cornell Center for Hospitality Research for their financial support in funding the data collection effort for this project.

Electronic copy available at: http://ssrn.com/abstract=1925865

Daily Deal Fatigue or Unabated Enthusiasm? A Study of Consumer Perceptions of Daily Deal Promotions

Abstract We examined consumer perceptions of daily deal promotions. In a survey-based study conducted with a diverse sample of 973 respondents (655 daily deal users and 318 non-users), we find no evidence of daily deal fatigue. Instead, the heaviest daily deal users (those who have purchased 11 or more deals) are the most enthusiastic about them. They indicate the greatest interest in checking their email for deal offers every day, have little trouble in using the deals before they expire, believe that daily deals help them save money on things they would have purchased anyway, and say they have integrated these deals into their usual shopping behavior. As another positive sign, all users indicate high levels of intentions to purchase a daily deal again within the next month. Non-users indicate not using daily deals primarily because of awareness and access issues, and given that only 16.7% of our panels population has used daily deals before, there is significant opportunity for growth of daily deals on the consumer side. In assessing different sites, Groupon has the highest levels of awareness, use, and heart share among daily deal users, whereas LivingSocial, eversave, Travelzoo, and OpenTable score significantly lower on these metrics. We also find daily deal usage decreases with the consumers age, increases with the household income, and is the highest for those who live in urban areas. Psychologically, heavier daily deal users are less interested in being seen as different or fringe in their shopping patterns, are less careful with their personal finances, are more interested in trying new things so as to have experiences to talk about and influence others, and are attracted to a deal because it is a deal rather than because of its magnitude. Our findings suggest that consumers may be less sensitive to the depth of daily deal discount than is conventionally believed and may be appealed to via creative and subtle offers offering lower discounts.

Electronic copy available at: http://ssrn.com/abstract=1925865

These are the BEST THING EVER.- Daily deal user Keep them coming.- Daily deal user

I.

Introduction
The daily deal industry stands at a crucial juncture in its evolution. On the one hand, interest

in this industry has never been higher. In marketing circles for example, no other marketing program has received as much attention in recent months as daily deals have. The investor community, the small and medium-sized businesses across a wide swathe of industries, and consumers all continue to evince sky-high levels of interest in daily deals1. However, on the negative side, a growing amount of the discourse is negative and critical of the daily deals industry, and is skeptical about its future. In recent weeks, experts have questioned the business model of industry leader Groupon2, reported with relish on the exit of Facebook and Yelp from the daily deal space3, gloated over the lower summer traffic to Groupons website4, and hypothesized that consumers, especially the early adopters of daily deals, are growing fatigued with them5 and remorseful after purchasing them6. There are even predictions that daily deals will die7. While prior academic studies have examined the experiences of small and medium-sized

See for example, King, Rachel (2011), Zulily daily deals for kids secures $43 million in funding, ZDNet, August 11, Available online at: goo.gl/8K6Sf, or Merino, Faith (2011), Juice in the City acquires Gaggle of Chicks, Vatornews, August 24, Available online at: goo.gl/OXisP. See also Taylor, Colleen (2011), Wine wars: Lot 18 gets new funds as Gilt debuts wine site, Gigaom, August 24, Available online at: goo.gl/cVKPZ. 2 Jackson, Nicholas (2011), The fall of Groupon: Is the daily deals site running out of cash?, The Atlantic, Available online at: goo.gl/LfJM8. 3 Lynch, Brendan (2011), Daily deal sites dwindling: Competition results in fewer web discount options, Boston Herald, August 31, Available online at: goo.gl/LBJ4Z; Pepitone, Julianne (2011), Facebook and Yelp retreat from daily deals, CNN Money, August 30, Available online at: goo.gl/Q4qWT. 4 See for example, Fitzgerald, Drew (2011), Groupon traffic hits summer slump as rivals gain hitwise, Wall Street Journal, August 26, Available online at: goo.gl/QQ13i. 5 ODonnell, Jayne (2011), Websites selling daily deals lose luster, USA Today, August 31, Available online at: goo.gl/rDxdq. 6 Choi, Candice (2011), Groupon remorse? Sites let users unload deals, ABC News, July 20, Available online at: goo.gl/X3dcz. 7 Virzi, Anna Marie (2011), Forrester predicts daily deals will die, ClickZ, August 25, Available online at: goo.gl/5Q4K5.

businesses with daily deal promotions8, there is no comparable study of consumers experiences with and perceptions regarding daily deals that is available in the public domain. Media reports on consumers experiences are mixed and although full of vivid and engaging anecdotes, do not provide a clear understanding. Where some stories extol the benefits of daily deals such as the exciting shopping experiences they provide, their addictive nature, and the deep discounts earned by consumers on a variety of products and services, others raise the possibility that daily deals lead to the purchase of low-quality goods and services, cause stress from having to redeem the purchased offer before it expires, and often result in disappointment from the purchase9.

II.

Study Objectives
In the current study, we seek a clearer understanding of how consumers view daily deals. By

conducting a large survey with a sample of daily deal non-users and users of different experience levels (novice consumers who have purchased a single or a few daily deals to experienced daily deal shoppers who have purchased 11 or more deals), we are able to assess and compared the perceptions of these different shopper groups. We seek to answer the following questions in this study: 1. Are daily deal shoppers growing fatigued with these deals? In general, what do they think of daily deals? 2. Which daily deal sites do shoppers know and use? We compare awareness and usage levels, and also chart heart share and fatigue rates for the major daily deal sites. 3. Why have non-users not purchased a daily deal thus far? 4. Which demographic and psychological characteristics of users predict amount of daily deal use? We create a profile of the daily deal user.

Dholakia, Utpal M. (2010), How effective are Groupon promotions for businesses? Rice University Working paper, Available online at: goo.gl/gPMPZ, and Dholakia Utpal M. (2011), How businesses fare with daily deals: A multi-site analysis of Groupon, LivingSocial, Opentable, Travelzoo, and Buywithme promotions, Rice University Working paper, Available online at: goo.gl/5YU1S. 9 Collazo, Jason (2011), Are you a diehard Groupon, well, groupie? Forbes.com, August 18, Available online at: goo.gl/xjzRo; Hirschkorn, Ursula (2011), Should I give up on Groupon? Millions of us use the money-off voucher website - but its deals aren't always what they seem,Daily Mail, September 5, Available online at: goo.gl/Empor.

III.

Study Method and Sample Details

To answer these questions, we conducted an online survey of adult American consumers to

understand their experiences with daily deals and their perceptions regarding such promotions. Because of the relatively low percentage of daily deal users in the population, we employed a quota-sampling approach to select our respondent sample, such that daily deal users were oversampled relative to their actual incidence in the population. We worked with a large national survey sampling and online panel company to conduct the survey. Our online survey was conducted during August 2011. The analysis described in the current report is based on a dataset containing 973 respondents, of which 318 (or 32.7% of the sample) had never purchased a daily deal before, and the remainder (or 655, 67.3%) had purchased at least one daily deal. It is important to note that this proportion does not reflect the actual ratio of daily deal non-users to users in the US population. In fact, to obtain 655 daily deal user responses, the online panel company had to contact 3,933 panel members (and screen out most of them because they were non-users). Thus, the actual proportion of daily deal users in the online panels membership is 16.7%10. In the survey, we asked a number of questions including how many daily deals respondents had purchased in the past (none, 1-2, 3-4, 5-6, 7-10, 11 or more), how experienced they were with buying and using daily deals, various aspects of their perceptions regarding daily deals (described in detail below), and their awareness and use of specific daily deal sites11. To nonusers, we asked why they had never purchased a daily deal in the past. From all respondents (both daily deal users and non-users), we also obtained a number of personality characteristics so as to ascertain which psychological traits predicted daily deal use. Finally, all respondents
This value is calculated as the number of respondents who had purchased at least one daily deal in the past divided by the total number of panel members who started the survey. A vast majority or 2,960 were screened out because they indicated that they had not purchased a daily deal and our quota of non-users had already been reached. The remaining 318 non-users actually completed our survey. 11 Respondents were also asked in depth about their experience with purchasing and using one particular restaurant daily deal. These questions, however, are not the focus of the present report, and are not described or analyzed here.
10

provided their demographic characteristics. The survey took between 10 and 15 minutes to complete for most respondents. In the final sample, the respondents were fairly evenly split between males and females (45% and 55% respectively). Age-wise, approximately half of them were 45 years of age or older (18-24, 9%; 25-34, 22%; 35 44, 17%; 45 54, 22%; 55-64, 19% and 65 or older, 11%). A majority of them were married (59%), and about two-thirds (64%) had no children at home. Furthermore, approximately two-thirds had a family income below $75,000 per year whereas 18% had an income of over $100,000 per year. The majority of respondents lived in an urban or suburban area (urban, 24%; suburban, 50%). These characteristics are indicative of a diverse, broad-based respondent sample.

IV.

Daily deal fatigue or unabated enthusiasm? The perceptions of daily deal users
A key question that forms the focus of this study is how perceptions regarding daily deals

and their use vary as shoppers purchase more daily deals over time. Specifically, do daily deal users grow fatigued with such deals and less enamored of them with experience, as some observers have recently noted12? Or does their enthusiasm for daily deals remain undiminished? The answer to this question is a critical input into any prognostications regarding the short- and longer-term potential of the daily deal industry as a whole, and to better understanding consumer behavior regarding daily deals. Our sample of respondents contains shoppers having a wide range of prior daily deal purchase experience, from those who have purchased just one or two daily deals in the past and state that they are not very experienced with daily deals, to those who have purchased more than eleven daily deals before and consider themselves very experienced with them13.
See for example, Greim, Lisa (2011), Will Groupon fatigue doom the daily-deals business? PC World, May 12, Available online at: goo.gl/btVEy, and Chansanchai , Athima (2011), Yelp latest victim of daily deals fatigue, Technolog at MSNBC.COM, Available online at: goo.gl/kdvSJ. 13 To assess self-perceived experience with daily deals, the specific question asked in our survey was Which of the following best describes you? Please select one of the following descriptions and participants could choose one of
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For inter-group comparisons, we classified the daily deal users in our sample into three categories: (1) novice users, defined as those who purchased between 1 and 4 daily deals in the past (N = 359), (2) experienced users, defined as those who purchased between 5 and 10 daily deals (N = 195) and (3) heavy users, defined as those who purchased 11 or more daily deals (N = 92). These labels also represent the self-perceived experience of respondents with daily deals. Specifically, most of the novice users (or 61%) described themselves as very inexperienced or not that experienced with daily deals, whereas close to two-thirds of experienced daily deal users described themselves as quite experienced (65.1%) and a vast majority of the heavy users (91.3%) called themselves quite experienced or very experienced with daily deals. After accounting for all potential respondents who were screened out because they had never purchased daily deals, Figure 1 summarizes the distribution of daily deal users (and non-users) in the online panel employed for the survey. Figure 1: Distribution of online panelists by daily deal usage

The figure provides a sense of the penetration of daily deals in the broader US consumer
the following four responses: (1) I have been purchasing daily deals since they first appeared; I am very experienced with them, (2) I have been purchasing daily deals for a while now; I consider myself quite experienced with them, (3) I have been purchasing daily deals only for a short time; I am not that experienced with them, and (4) I purchased my first daily deal very recently; I consider myself very inexperienced with them.

base, indicating that as of August 2011, just over 16% of individuals have purchased daily deals. Obviously, given the vast number of daily deal non-users, there appears to be significant room for growth for the daily deal industry. Later in this report, we explore the reasons why non-users have not adopted daily deals in more detail. We asked respondents who had purchased daily deals to provide their level of agreement or disagreement (on 1-7 scales anchored with Strongly disagree and Strongly agree labels at the ends) regarding a number of positive (e.g., enthusiasm regarding daily deals) and negative (e.g., increased buying and spending because of daily deals) aspects of daily deals. In this section of the report, we examine how these three daily deal user groups vary in what they think of daily deals and how they intend to use these deals in the future. 1. Buying and spending more because of daily deals. The first set of survey measures concerned the extent to which daily deals made consumers buy products and services they normally would not buy, and spend more on certain products or services. Both measures represent potentially negative perceptions of daily deals. Figure 2 provides the average responses of the three daily deal user groups. Figure 2: Perceptions of buying & spending by daily deal user type
7 Because of daily deals, I buy products and services I normally would not buy I spend more money on certain products and services because of daily deals 6

5 4.25 3.66 4.23 4.32 4.15

4.09 4

1 Novice DD Users Experienced DD Users Heavy DD Users

Figure 2 indicates none of the users seems to believe that they are buying unusual products (ones they normally would not buy) because of daily deals to a significant degree (the means for all three groups are near the mid-point on the 7-point strongly disagree strongly agree scale). There is no statistical difference between the groups on this measure14. However, comparatively speaking, both experienced (M = 4.23) and heavy daily deal users (M = 4.15) clearly feel that they spend more money on certain products and services because of daily deals to a significantly greater extent than novice users do (M = 3.66)15. 2. Changes in buying and amount of interest in daily deals over time. To address the fatigue or unabated enthusiasm question more directly, we asked daily deal users to indicate their agreement to: I buy daily deals less often than I used to and I have lost interest in daily deals over time. Both measures elicit potential changes in enthusiasm among daily deal users over time, allowing us to find evidence of daily deal fatigue, if it exists, in the sample. Figure 3 summarizes the mean responses of the three user groups. As can be seen from the figure, the levels of agreements for both measures are relatively low (substantially less than 4 on 1-7 scales). Furthermore, even within these low levels across the sample of daily users, those who have purchased 11 or more deals in the past (the heavy users) report significantly greater disagreement that they are buying deals less often as well as with the statement that they have lost interest in daily deals over time16.

The results of an Analysis Of Variance (ANOVA) showed there was no effect of user type on the response to this question (F(2,643) = .94, p > .39. 15 In the case of this measure, an ANOVA revealed a significant main effect of user type (F(2,643) = 8.50, p < .001. Post-hoc pairwise comparisons of group means showed that both the experienced (p < .01) and the heavy (p < .05) user groups had significantly higher mean responses than novice daily deal users. However, the experienced and the heavy daily deal users did not vary from each other. 16 For the measure I buy daily deals less often than I used to, the results of an ANOVA found a main effect of user type (F(2,643) = 10.09, p < .001). Post-hoc comparisons of group means showed that the heavy daily deal users had significantly lower agreement levels than either the experienced (p < .001) or the novice (p < .001) user groups. A very similar pattern of results was obtained for the measure I have lost interest in daily deal sites over time. In this case, the ANOVA again found a significant main effect (F(2,643) = 12.05, p < .001). The novice user group had a significantly higher level of agreement when compared to either the experienced or the heavy daily deal users.

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Figure 3: Frequencies of buying and interest in daily deals

7

I buy daily deals less often than I used to

6

I have lost interest in daily deals over time

4 3.68 3.40 3 2.96 2.83 2.51 3.61

1 Novice DD Users Experienced DD Users Heavy DD Users

To probe this issue further, we wanted to see what proportion of the experienced and heavy daily deal users are susceptible to daily deal fatigue, operationalized as the respondents who either agree or strongly agree with these two statements. Figure 4 provides the frequency distributions of responses for the two measures (buy deals less often and lost interest) for the experienced and heavy users. For this analysis, the novice daily deal users were excluded. Figure 4: Frequency distribution of experienced & heavy user responses
40%

Experienced and Heavy Daily Deal Users

I buy daily deals less often than I used to I have lost interest in daily deals over time

35%

30%

28.6%

25%

24.0% 21.3%

20%

19.5% 18.1% 14.6%

15%

14.3% 13.6%

14.3%

10.8%

10%

9.1%

5.2%

5%

3.8% 2.8%

0% Strongly disagree Disagree Somewhat disagree Neutral Somewhat agree Agree Strongly agree

10

As can be seen from Figure 4, only a handful of the experienced and heavy daily deal users agree or strongly agree to the two statements. In the case of I buy daily deals less often than I used to, only 12.9% of respondents indicate agreement or strong agreement, and for I have lost interest in daily deals over time, the percentage is even lower, at just 8.0%. Taken together, these results provide no evidence of daily deal fatigue among our studys respondents. If anything, the results indicate the opposite: shoppers who have purchased daily deals to a greater extent in the past continue to remain enthusiastic about such deals to a significant and broad-based degree. 3. Positive enthusiasm regarding daily deals. On the flip side, to what extent are daily deal shoppers continuing to check daily deal offers emailed to them, and to use Facebook and Twitter to share deals that they like with their social network? These measures can be construed as another aspect of daily deal fatigue, since lower interest in checking emails from daily deal sites, or sharing appealing deals with others is indicative of flagging enthusiasm. Figure 5 summarizes their responses. Figure 5: Checking daily deal emails and sharing deals with others
7 I check daily deal offers in my email every day I share daily deals I like through Facebook and Twitter 6 5.20 5 4.70 5.73

4 3.32 3 3.43 3.51

1 Novice DD Users Experienced DD Users Heavy DD Users

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When asked about checking emailed daily deal offers every day, all three user groups indicate agreement (higher than 4 on a 1-7 scale). Additionally, the level of agreement is significantly higher for experienced users when compared to novice users, and for heavy users when compared to either one of the other two groups17. This is yet another data point contradicting the assumption of daily deal fatigue among consumers. Instead, we find that the heavy daily deal users are the ones who are the most interested in checking their email every day for daily deal offers. Interestingly, the respondents are not as enthusiastic about sharing favored offers through social networking sites such as Facebook or Twitter. The levels of agreement in this case are low for all three groups (less than 4 on the 1-7 scale) and there are no statistical differences between them. It appears that the social aspect of daily deals is not as important to our sample of respondents as is the personal aspect of looking for and receiving a good deal. These results, coupled with the results obtained for respondents reported changes in buying and their levels of interest in daily deals offer unvarnished good news for daily deal site operators. They clearly indicate that the enthusiasm for daily deals remains at high levels, and is undiminished among the heavy daily deal users. Even more encouraging, these findings show that none of the user groups seem to indicate any slowing in their purchasing activity of daily deals over time nor in their responsiveness to offers received through the email. 4. Other negative aspects of daily deals. We also examined three other potentially negative perceptions regarding daily deals. The first measure concerned the extent to which the individual purchased daily deals impulsively, the second asked about the extent to which the person felt overwhelmed by the number of daily deal offers received every day, and finally, we asked about the extent to which respondents ended up not using the daily deal within the specified time

An ANOVA for this measure found a main effect of user type (F(2,643) = 14.62, p < .001). Post-hoc comparisons of group means showed that the heavy deal users had significantly higher agreement levels than either the experienced (p < .05) or the novice (p < .001) user groups. Furthermore, the experienced group had a significantly higher agreement level than the novice group (p < .005).

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period, losing money on the deal. Figure 6 summarizes the responses by user group. Figure 6: Negative aspects by daily deal user type
7 I often buy daily deals impulsively. I feel overwhelmed by the number of daily deal offers I receive in my email every day. I often end up not using the daily deal within the specified time and lose money

4 3.41 3 3.53 3.05

3.65 3.32 2.81

3.82

2.83 2.64

1 Novice DD Users Experienced DD Users Heavy DD Users

Interestingly, the average levels for the groups for all three measures are below four, indicating neutral to low levels of overall agreement regarding the three potentially negative aspects of daily deals. Furthermore, the differences between the groups are interesting. Everyone indicates equal degrees of (moderate) agreement with the fact that they purchase daily deals impulsively, without prior planning or deliberation, and by and large does not view not being able to use the daily deal within the specified time period to be an issue for them; however, the heavy daily deal users again indicate feeling overwhelmed due to the volume of daily deal offers received to significantly lower levels than the other two groups18. Overall, what emerges from these results is a consistently high level of enthusiasm for daily deals among shoppers who use daily deals the most. Although recent articles in the press and by
In the case of feeling overwhelmed, an ANOVA revealed a significant main effect (F(2,643) = 5.60, p < .005), and post hoc comparisons showed the heavy users to be significantly lower than the novice users (p < .005) and marginally lower than the experienced users (p < .10).
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marketing experts have discussed phenomena such as Groupon fatigue, our data find no evidence to support this phenomenon. In fact, we consistently find the opposite pattern of results here: the more experienced the daily deal users are as defined in terms of the number of deals purchased in the past, and their self-assessment of experience with daily deals, the more enthusiastic they are about daily deals. They not only seem receptive to receiving daily deal offers, but they also feel like they are able to redeem purchased deals before time runs out. 5. Positive aspects of daily deals. Finally, we asked daily deal users about three positive aspects of daily deals: (1) the extent to which such deals help them save money on things they would have purchased anyway, (2) the extent to which the deals have become an important part of their shopping behavior, and (3) their intentions to purchase a daily deal within the next one month. Figure 7 summarizes the average response levels for the three shopper groups. Figure 7: Positive aspects by daily deal user type
7 Daily deals help me save money on things I would have bought anyway Daily deals have become an important part of my shopping behavior 6 I intend to purchase a daily deal within the next one month 5.33 5.10 5 4.58 3.99 4.82 5.49 5.29 5.05 5.74

1 Novice DD Users Experienced DD Users Heavy DD Users

While all groups report relatively high levels, the heavy users report the highest average

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levels (greater than 5 on 1-7 scales) for all three measures, and are significantly higher than the novice users in all three cases19. All three user groups confidently agree that daily deals help them save money on things they would have purchased anyway. Not surprisingly, where the novice users still havent made daily deals an important part of their shopping behavior, both experienced and heavy users have done so to significantly greater degrees. Finally, and most heartening from the viewpoint of daily deal sites, all three groups report high levels of intentions to purchase another daily deal within the next one month. Again, there are systematic inter-group differences such that the experienced user group has higher purchase intentions than the novice user group, and the heavy users have higher purchase intentions than either the novice or the experienced users.

V.

User perceptions of different daily deal sites

We asked daily deal users a number of questions regarding their awareness, use, and

perceptions of different daily deal sites. The daily deal sites included in this analysis were: Groupon, LivingSocial, Travelzoo, Gilt City, OpenTable, BuyWithMe, ScoutMob, eversave, and Restaurant.com. Note that our questions about these sites were limited to those respondents who had purchased at least one daily deal in the past, and therefore indicate the opinions of daily deal shoppers. 1. Awareness and use of daily deal sites. Participants indicated whether they were aware of each site, and also whether they used the site sometimes or often. We combined the responses for the two types of use to calculate the total percentage of respondents that used each of the daily deal sites in our list. Figure 8 summarizes the percentages of those aware of each site and those who use the site.

For all three measures, individual ANOVAs revealed significant main effects of user groups. Furthermore, posthoc comparisons revealed that the heavy user group had significantly higher means than the novice group in all three cases at the p = 0.05 level of significance.

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Figure 8: Awareness and use levels by daily deal site

100%

93.6%
90%

% Aware of DD site 80.2% % Using DD site

83.1%

80%

70%

60%

56.3%

56.2%
45.8%

50%

48.1% 42.4%

46.1%

40%

32.5%
30%

31.1% 22.9%

20%

18.8% 10.5%

18.5% 10.5% 7.8%

19.2%

10%

0%

As seen from the figure, awareness levels are the highest for Groupon (93.6%), followed by Restaurant.com (83.1%), and LivingSocial (80.2%). Beyond these three sites, awareness levels drop off significantly. The usage numbers are equally interesting and counter-intuitive, providing evidence of a largely fragmented market. Of any site, the largest proportion or 56.3% use Groupon, followed by Restaurant.com (46.1%) and LivingSocial (45.8%). Again, there is a steep drop-off; the next most used site is eversave (19.2%), followed by Travelzoo (18.8%) and OpenTable (18.5%). From these usage numbers, we can conclude that virtually all the daily deal sites (including Groupon) have significant opportunities and room to grow in the future, where use by consumers is concerned. 2. Heart share. We also asked respondents to tell us which of the daily deal sites was their favorite one. We then used the frequencies of their choices to calculate a heart share metric for each site, which we define as the proportion of the respondents who designate the daily deal site as their favorite. Figure 9 provides the heart shares for the daily deal sites in our sample.
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Figure 9: Heart share by daily deal site

50 45 40 35 30 25 20 16.2 15 10 5 0 9.9 7.3 3.3 2.3 6.1 3.0 3.3 5.3 43.3

As can be seen, Groupon has by far the largest heart share of 43.3, which is more than twice as much as the next daily deal site, Restaurant.com (16.2). Interestingly, the heart share of LivingSocial is relatively very small, at just 7.3 (or just over one-sixth the value of Groupon), followed by OpenTable (6.1) and eversave (5.3). Where the two major daily deal sites are concerned, these numbers are positive from the standpoint of Groupon, indicating its relative brand strength, and may be a cause for concern for LivingSocial given the relatively few daily deal users who consider it as their favorite site. 3. Fatigue with daily deal site use. Finally, we calculated a fatigue metric for each daily deal site. This was done based on responses to the measure I dont use this site as much as I used to. We aggregated the responses for each site and divided by the total base of daily deal users. Figure 10 summarizes the results.
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Figure 10: Percentage fatigued with site by daily deal site

5.0% 4.6% 4.5% 4.0% 3.5% 3.0% 2.5% 2.1% 2.0% 1.5% 1.5% 1.0% 0.5% 0.0% 2.9% 3.1% 2.7% 2.6% 2.6% 3.4%

Consistent with our earlier findings, the fatigue levels are low for all sites. The highest value is for Restaurant.com, in which case 4.6% of respondents admit that they use the site less than they used to. On this metric, too, Groupon is the best-performer, with only 1.5% of respondents indicating that they are fatigued with the site. Overall, these results are in line with our findings from earlier in the report that fatigue with daily deals is a relatively rare phenomenon among daily deal users.

VI.

Why daily deal non-users have never purchased a daily deal

In our study sample, a total of 318 respondents were included who had never purchased a

daily deal in the past. To find out why, we provided these individuals with a list of ten reasons, and asked them to indicate which one(s) of them explained why they had never purchased a daily deal. They could choose as many or as few of the ten reasons as were applicable to them. Figure 11 summarizes the percentage of respondents that chose each reason for not having purchased a daily deal in the past as applicable to them.
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Figure 11: Reasons daily deal non-users have not purchased a daily deal
50%

45.3%
45%

40%

% of respondents indicating reason

35%

30%

27.4%

25%

20%

17.9% 15.7%

15%

10%

7.2%
5%

6.0% 1.6% 2.5% 0.0%

I just never I am I feel guilty I feel like I thought of uncomfortable about using will receive buying one using coupons coupons poor service if I use coupons

3.8%

0% I did not know Daily deals are I don't like about daily not available using any deals in my area types of coupons I don't like Businesses I think daily buying things that offer daily deal coupons online deals are not are bad for appealing to businesses me

As can be seen from the figure, the most frequently given reason, by 45.3% of non-users, is that they did not know about daily deals. Relatedly, the next most commonly given reasons were I just never thought of buying one (27.4% of respondents) and Daily deals are not available in my area (17.9%). On the other hand, very few non-users gave reasons having to do with not liking or not wanting daily deals in particular, or coupons in general. For instance, only 1.6% of daily deal non-users said they had not purchased a daily deal because such deals are bad for businesses, only 2.6% of this group indicated that they are uncomfortable using coupons and not a single daily deal non-user indicated that they felt guilty about using coupons. These results suggest that among the daily deal non-user base, the greatest hurdles to the trial and adoption of daily deals appear to be awareness and access about such deals. Most daily deal non-users have not used them simply because they dont know about them or dont have access to them. As the major daily deal sites continue or even ramp up their marketing activities targeted at increasing awareness, particularly through broadly accessed means such as television advertising, and enter smaller cities and towns throughout the US, our results indicate that adoption rates of daily deals among consumers should continue to grow.
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VII.

Demographic and psychological predictors of daily deal use

In this last section of the report, we focus on trying to understand which consumers are likely

to use daily deals to a greater extent. Our goal here is to provide both merchants and daily deal site operators with a better understanding of the profile of daily deal users. To do so, we examine how demographic and psychological characteristics of consumers predict daily deal use. Demographic predictors of daily deal use. In the analysis, we included the following demographic variables of respondents: their gender, age, annual household income, marital status, place of residence (whether urban or suburban), and number of children under 18 in the household. We conducted a regression with the number of daily deals purchased (0 to 11+) as the dependent variable, and the demographic variables as predictors. Table 1 summarizes the results.
Table 1: Results of regression of # daily deals purchased on demographic characteristics
Variable Standardized Regression Coefficient -.00 -.13 .22 -.02 .01 .20 .13 .01 t-value p-value

Gender (female = 1, male = 0) Age Annual household income Whether single Whether married Whether live in urban area Whether live in suburban area Number of children in household under 18

-.017 -3.40** 6.42** -.43 .23 5.05** 3.23** .19

.99 .00 .00 .67 .82 .00 .00 .85

**indicates statistically significant coefficient at the p = .05 level of significance; *indicates statistically significant coefficient at the p = .10 level of significance; R2 = .11.

These results indicate that four predictors explain the number of daily deals purchased by respondents. First, age is a negative predictor indicating that the younger the consumer, the more are the daily deals purchased. Second, and surprisingly, annual household income is a positive predictor, indicating that higher annual household income is associated with the purchase of more daily deals. Finally, those living in either suburban or in urban areas are likely to have purchased significantly more deals. Perhaps not surprisingly, urban consumers have purchased

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more daily deals than suburban consumers, as evidenced by the larger standardized regression coefficient for the urban vs. the suburban respondents in Table 120. Finally, this analysis shows that the individuals gender, marital status or the number of children in his or her household do not influence the purchase of daily deals. Psychological predictors of daily deal use. Research has shown that people are motivated to perform many volitional actions such as purchasing and using daily deals to different degrees because of stable underlying individual differences21. In the current analysis, we examine the effects of the following six individual differences: Buying impulsiveness. Buying impulsiveness characterizes a consumer's tendency to buy spontaneously, unreflectively, immediately, and kinetically. Prior research has shown that highly impulsive buyers experience spontaneous buying stimuli to a greater degree and their shopping behavior is more "open" and unplanned, receptive to sudden, unexpected buying ideas22. Here, we wanted to see if greater daily deal use is associated with greater buying impulsiveness tendencies. Unpopular Choice Counterconformity (UCC): Many consumers are motivated to behave in ways that establish them as unique or different from others. Consumer psychologists call this basic motivation as Need for Uniqueness. UCC is one aspect of need for uniqueness, referring to the persons selection or use of products and brands that deviate from group norms and thus risk social disapproval that consumers withstand in order to establish their differentness from others23. It can be argued that daily deal shoppers make such purchases, at least in part, to
20

We also conducted a binary logistic regression using heavy daily deal purchase (1 if respondent was a heavy daily deal user, 0 otherwise) as the dependent variable and with the same set of demographic variables as Table 1 as the predictors. We obtained substantively similar results as those in Table 1. The only difference was that in this case, the suburban dummy variable was no longer a significant predictor. Thus, age (negatively), income (positively) and urban residence (positively) predicts being a heavy daily deal user. 21 Ozer, Daniel J. and Vernica Benet-Martinez (2006), Personality and the prediction of consequential outcomes, Annual Review of Psychology, 57, 401-421. 22 Rook, Dennis W. and Robert J. Fisher (1995), Normative Influences on Impulsive Buying Behavior, Journal of Consumer Research, 22(3), 305-313. 23 Tian, Kelly Tepper, William O. Bearden and Gary L. Hunter (2001), Consumers Need for Uniqueness: Scale Development and Validation, Journal of Consumer Research, 28(1), 50-66

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establish their originality, and we wanted to see if UCC would be a positive predictor of daily deal purchase. Consumer Spending Self-Control (CSSC): From a personal finance perspective, daily deals can be viewed as double-edged swords. On the one hand, the consumer saves substantial amounts of money on the purchase. However, on the other, they stimulate shopping for products and services that otherwise would not have been purchased. In this context, CSSC is defined as the defined as the individuals ability to monitor and regulate his or her spending-related thoughts and decisions in accordance with self-imposed standards24. Depending on which edge of the two-edged sword is more prominent in shoppers minds - daily deals as money-saving tools or as temptations to shop more CSSC is expected to have a positive or negative effect on purchasing daily deals. Market Maven: Market mavens are individuals who have information about many kinds of products, places to shop, and other facets of the market, and initiate discussions with and respond to information requests from other consumers25. Consumers who score high on this trait have a greater propensity to share information with others and usually have greater interpersonal influence. Because daily deals allow consumers to try out new products and services, and expand their palette of experiences, we wished to examine if the individuals market maven trait can predict the use of daily deals. Relational Orientation: We also wished to examine whether daily deal users are transactionally or relationally orientated towards the firms they do business with. Consumers vary considerably in the degree to which they prefer to form loyal, longer-term relationships with products and brands26, and one concern which has been raised by prior studies is that daily deals, by their very nature, attract transactionally oriented shoppers who have no interest in any future
Haws, Kelly L., William O. Bearden and Gergana Y. Nenkov (2011), Consumer Spending Self-Control Effectiveness and Outcome Elaboration Prompts, Journal of the Academy of Marketing Science, in press. 25 Feick , Lawrence F. and Linda L. Price (1987), The Market Maven: A Diffuser of Marketplace Information, Journal of Marketing, 51(1), 83-97. 26 Fournier, Susan (1998), Consumers and their brands: Developing relationship theory in consumer research, Journal of Consumer Research, 24(4), 343=353.
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purchase from the store. Coupon Proneness: The final psychological characteristic we examine in this study is the shoppers coupon proneness, which is defined as the increased propensity of the consumer to respond to a purchase offer because the promotion makes the purchase appear attractive (regardless of how much money is actually saved)27. To the extent that daily deals attract coupon prone shoppers, we can say that these shoppers may be less sensitive to the actual size of the deal being offered.
Table 2: Psychological constructs, measures, and their reliability Construct
Buying Impulsiveness (IMPULSE) 1. 2. 3. 4.

Measures
I often buy things impulsively. I buy things according to how I feel at the moment. "Buy now, think about it later" describes me. Sometimes I am a bit reckless about what I buy.

Reliability
.85

Unpopular Choice Counterconformity (UCC)

1. I rarely act in agreement with what others think are the right things to buy. 2. I have often violated the understood rules of my social group regarding what to buy or own. 1. I closely monitor my spending behavior. 2. I carefully consider my needs before making purchases. 3. When I go out with friends, I keep track of what I am spending. 4. Having objectives related to spending is important to me. 1. I like helping people by providing them with information about many kinds of products. 2. My friends think of me as a good source of information when it comes to new products or services. 3. I like introducing new brands and products to my friends. 1. When I find a brand I like, I tend to remain loyal to it for a long time. 2. I like to develop long-term relationships with products and brands I like. 3. I am loyal to companies that treat me well. 1. I enjoy using coupons regardless of the amount I save by doing so. 2. I am more likely to buy brands for which I have a coupon. 3. Coupons have caused me to buy products that I normally would not buy.

.52

Consumer Spending SelfControl (CSSC)

.78

Market Maven (MAVEN)

.87

Relational Orientation (RO)

.83

Coupon Proneness (COUPON)

.69

27

Lichtenstein, Donald R., Richard G. Netemeyer and Scot Burton (1990), Distinguishing Coupon Proneness from Value Consciousness: An Acquisition-Transaction Utility Theory Perspective, Journal of Marketing, 54(3), 54-67.

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Table 2 above summarizes the measures used in the survey to assess each of these psychological constructs and shows that each of the constructs measures had adequate reliability. Consequently, the measures were each averaged before use. We conducted a regression with number of daily deals purchased (0 to 11+) as the dependent variable, and the six psychological variables as predictors. Table 3 summarizes the results.
Table 3: Results of regression of # daily deals purchased on psychological characteristics
Variable Standardized Regression Coefficient .02 -.08 -.09 .25 -.02 .10 t-value p-value

Buying Impulsiveness Unpopular Choice Counterconformity Consumer Spending Self-Control Market Maven Relational Orientation Coupon Proneness

.46 -2.33** -2.28** 6.43** -.62 2.82**

.65 .02 .02 .00 .54 .01

**indicates statistically significant coefficient at the p = .05 level of significance; *indicates statistically significant coefficient at the p = .10 level of significance; R2 = .09.

These results show that four of the shopper traits predict daily deal usage. First, unpopular choice counter-conformity is a negative predictor, indicating that consumers for whom being distinctive through purchase of fringe brands or products is important are likely to purchase fewer daily deals. In a sense, this result reflects the appeal of daily deals for mainstream shoppers. Second, consumer spending self-control is a negative predictor of daily deal use, indicating that consumers who monitor and regulate their spending to a greater degree use fewer daily deals. However, interestingly, buying impulsiveness does not predict daily deal usage, which is in line with our earlier finding in this report that shoppers do not view their daily deal purchases as impulsive. Third, the shoppers market maven trait is the strongest positive predictor of their daily deal usage, suggesting that a key motivator for daily deal purchase is trying out new products such as restaurants to be able to talk about these new experiences and make suggestions to friends

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thereby influencing them. Finally, we found coupon proneness to be a positive predictor, raising the possibility that individuals may use daily deals to a greater extent simply because the item is being promoted. On the other hand, relational orientation was not found to be a predictor, suggesting that daily deals do not appear to be attracting particularly transactional or relational consumers to greater degrees. To summarize, what emerges from these results is the following profile of daily deal users:

DAILY DEAL SHOPPER PROFILE Younger, higher income, and live in urban or suburban areas. Have little interest in being seen as different or fringe in their shopping patterns Not very careful with personal finances, and do not think about spending issues all the time. Interested in trying new products or services so as to have new experiences to talk about and influence others. Attracted to a deal because it is a deal, and likely to be less sensitive to the actual terms of the offer made by the merchant.

VIII.

Limitations of this study

The current study has a number of limitations that should be noted to be able to accurately

assess its results. First, although we have a diverse sample of respondents covering a range of demographic characteristics, the sample is a convenience sample of respondents. It was obtained from members of a large online panel, and as such is not meant to represent the US consumer population in precise ways. Second, for any number of reasons, those who chose to respond to this survey could be different from those who chose not to respond and such a difference could results in biases in our findings. However, we have no particular reason to believe that this is the case to any significant extent. Third, like any survey, responses are self-reports and reflect the

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opinions of respondents. As such, they are subject to change and could have been provided strategically, although again, we have no particular reason to suspect that this is the case.

IX.

Concluding Thoughts

We conclude this report with thoughts that although somewhat speculative, follow from the findings of this and other daily deal studies conducted by us. When consumers are asked how sensitive they are to price or how much of a discount they require, they are notoriously strategic, asking for deep discounts28. They may even threaten to stop buying the product if the discounts are restricted29. Yet, in this behavior, as in other areas of life, there is a gap, often a substantial one, between what people say and what they actually do. Consumers motivations, rather than their stated intentions, provide more accurate insight into how they will actually behave. The results of the present study reveal a consistent pattern of findings that brings into question one of the fundamental tenets held implicitly or explicitly by most in the daily deal industry: Consumers have to be offered deep discounts to get them to buy daily deals. Instead of fatigue with daily deals, the picture that emerges in our research is one of users having an unabated, even extreme enthusiasm with daily deals. The heaviest daily deal users are found to be the most enthusiastic ones. They look forward to receiving their daily offer in the email. They strongly believe that they are saving money on things they usually buy when using daily deals. And they have actively integrated daily deals into their normal shopping behavior. Their use of daily deals is here to stay. Even looking beyond the heaviest daily deal users, we find an undercurrent of genuine appreciation and interest regarding daily deals among the other user groups, and high levels of future purchase intentions among every one. Probing deeper into their motivations for purchase
See Wertenbroch, Klaus and Bernd Skiera (2002), Measuring Consumers' Willingness to Pay at the Point of Purchase, Journal of Marketing Research, 39(2), 228-241 for a nice discussion of this issue along with a possible solution. 29 Alba, Joseph W., Carl F. Mela, Terence A. Shimp and Joel E. Urbany (1999), The Effect of Discount Frequency and Depth on Consumer Price Judgments, Journal of Consumer Research, 26(2), 99-114.
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reveals that being able to try new experiences and talk about them to others, and the pleasure of getting a deal outweigh the specific depth of the discount received. Impulsiveness does not play a role in how many daily deals are purchased nor does a transactional orientation such as a let me get the most I can out of the merchant mentality. In fact, nowhere in our results do we find a widespread and firm insistence on getting deep discounts among daily deal shoppers. Although people naturally want to save money and get a good deal, the findings of this study raise the possibility that a majority, if not most users, may buy daily deals even if the offer is a little less sweet, and the terms of the deal a little more well-defined and constrained. Especially when it is clear to shoppers that the sustainability of daily deals, and in particular, the continued operation of the local merchants that they like and want to support, depends on reaching a better balance between merchant welfare and consumer savings from such deals. We note, however, that more research focused on examining this specific issue is needed to draw definitive conclusions. Perhaps now is the time for the daily deal industry --- both site operators and merchants --- to turn their attention away from offering deeper and deeper discounts and making blanket offers which bruise the merchants more often than not30, to more creative and subtle ways of making offers that appeal to consumers and benefit merchants alike. Although difficult to do because of the greater thought, effort, and knowledge of the business and customers involved, we believe that such a shift will mark the next step in the daily deal industrys evolution, and prevent the prognostications of the industrys demise from coming true.

30

See for example Dholakia, Utpal M. (201(2010), How effective are Groupon promotions for businesses? Rice University Working paper, Available online at: goo.gl/gPMPZ, and Dholakia Utpal M. (2011), How businesses fare with daily deals: A multi-site analysis of Groupon, LivingSocial, Opentable, Travelzoo, and Buywithme promotions, Rice University Working paper, Available online at: goo.gl/5YU1S.),

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