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Yes, Social Coupons Do Drive New Business: ForeSee Study

By Jun 30, 2011

Almost since their inception, social coupons such as those promoted by Groupon and LivingSocial have been dogged by the reputation that they don’t work very well to draw new customers or to induce loyalty and return visits. But a new study from consumer research firm ForeSee Results suggests that those fears about social coupons—now morphed into “Daily Deals”–may be misplaced.

Integrating a few questions on “daily deal” offer usage into its 2011 survey of customer satisfaction with the top 100 etailers, ForeSee researchers discovered that 65% of the visitors to those sites report that they are enrolled in at least one email program to receive a daily deal offer.

Right now Groupon has the biggest share of that market, with 51% of respondents telling ForeSee that they receive daily email offers from the Chicago-based social couponer.

LivingSocial is next in share, with 24% of those polled signed to receive daily offers. Google Offers (14%) and Woot! (10%) came next, and 7% of respondents said they got daily offers in their mailbox from other programs.

Those enrollment findings suggest that despite its moon-shot growth numbers over the last year, the daily deal market may still have lots of new prospects to sign. For one thing, members can belong to more than one service. Of those who said they subscribe to daily deals, almost half (46%) said they belong to more than one offer platform.

And a still substantial 35% of respondents said they are not currently enrolled in a daily deal program. Many of those may just not be interested, but chances are good that at least some of the holdouts just haven’t seen the right value proposition come through yet.

No matter which site they used, about two thirds of the subscribing visitors polled said they had bought a social coupon in the previous three months. The percentage held pretty steady whether respondents subscribed to Groupon or Woot! (60% purchased in previous 90 days), LivingSocial (59%) or Google Offers (56%).

ForeSee also found that most of those buyers (88%) went ahead and used the coupons they’d purchased inside that 90-day time frame.

The big question is, who’s buying those deals? According to ForeSee’s research, 38% of them are going to visitors who are already frequent customers of the merchants supplying the coupons. That’s the bad news– that marketers might be giving away revenue and eroding margins to score sales they would get anyway at full price.

But ForeSee also found that 31% of those daily deal offers were bought by new customers who had not previously tried the businesse4s in question. They might not have been aware of the offering merchant at all, or they might have had some low level of awareness.

In addition, ForeSee’s research turned up the facts that 27% of those deals were sold to customers who described themselves as “infrequent’ buyers at the businesses offering the deals. Another 4% of deal buyers characterized themselves as “former” customers of those businesses.

“That’s at least 35% and arguably 62% of deal buyers that represent NEW business,” said ForeSee CEO Larry Freed in a post on the company’s blog, addressing marketers. “These are the customers that provide what the daily deal model is supposed to provide: bringing you new customers to try your business or products out. Now it’s up to you to do a great job in meeting their needs and satisfying these new customers… to the level that will allow you to convert a percentage of [them] into long term, loyal customers.”

The ForeSee Results study questioned some 22,000 visitors to the top 100 retail Web sites about various topics relating to their shopping habits and satisfaction in the February-March time frame.