The Watering Hole : Marketing Tips & Stories

Many business owners believe that if they offer a daily deal such as Groupon or LivingSocial, their customer base will expand and they'll reach maximum profitability. However, as we've discussed before, there are some downsides to offering huge discounts on Groupon and other such sites.

The downside of daily deals and coupons include:

• In a study by Rice University, 32% of sales were not profitable for the business.
• The business might not be set up to handle sudden "rushes" of people redeeming their coupon, both staff and infrastructure-wise.
• In the same study by Rice University, 40% of the respondents who ran a promotion say they would not run such a promotion again.

In addition, industry experts are now saying that consumers might be beginning to suffer from "deal burnout," since everything from Yelp to Facebook to Travelzoo flood consumers' mailboxes with "limited time," "deeply discounted" bargains daily.

Recent research (and actually, there isn't much since this phenomenon is so new) has indeed shown that consumers may be on their way to deal overload. A study performed earlier this year by PriceGrabber.com found that the majority of online shoppers (52%) confessed to being "overwhelmed" by the sheer number of daily deals they got.

And another ongoing study led by Professor Utpal Dholakia at Rice University, is also finding that over time deal subscribers become less interested in the deals they receive. Says Dholakia:

We definitely see a diminishment of interest and involvement with daily deals over time… When consumers first sign up for deals, they are enthusiastic and interested, they want to share the deal with friends and family, but in interviews we've done, we see people don't share their daily deal choices on Facebook and Twitter as much later on. It's a classic symptom that they are becoming less involved.