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The Issues Surrounding Online Daily Deals

At the time when restaurants are conflicted about their use of online group and daily-deals, seriously evaluating its pros and cons, Connell University and Rice University researchers came up with a study to help foodservice operators decide.

The study, conducted with a group of restaurant buyers who patronize daily-deal sites, revealed that big promotional offers at these websites could fetch in new customers to the restaurant. This, despite the fact that such offers may bring about sales cannibalization within the dining establishment.

Just like Technomic’s report last August, the results of the study indicated that new customers who were pleased with their dining experience are likely to come back to the restaurant and will probably recommend the place to their friends. Technomic’s study showed that 67% of their respondents return to the place even without a daily deal coupon.

An interesting finding that the universities found out, however, shows that a cannibalization of the restaurants’ existing market occurs–it showed that 44% of the online deals’ buyers are existing frequent diners. 22% were new to the restaurant while 34% were existing, infrequent customers.

In terms of popularity of the deal sites, Groupon led the list, with recognition of 92%; trailed by Restaurant.com’s 82.7%. Living Social followed with 79.5%, then TravelZoo at 54.1%. The others in the list were Gilt City, BuyWithMe, Open Table, Blackboard Eats, ScoutMob, EverSave and Daily Candy.

The results also showed that users of daily deals are not necessarily tightfisted, or cheap. They are likely to tip servers based on the full amount of the check as presented in the restaurants’ superior check presenters, before the discount. Respondents to the survey that was made said that they ordered and spent as much as they previously did at the restaurant, even without the discount. The existing, frequent diners who bought promotional deals online were found to be significantly likely to spend more than their usual expenditure, as presented fully in the restaurant’s check presenter, as compared to the infrequent customers or the new diners.

The study also indicated that deal buyers did not sense any inferior treatment from the establishment as they redeemed their vouchers—they did not feel like they were treated as “second rate.” The respondents also emphasized that the deep discount offer made by the restaurant did not lessen their regard for the dining establishment, or harm its image.

The profile of the buyers was also closely analyzed, and the university researchers claimed that deal users are most likely good at influencing others. Frequent deal buyers can well be considered as market mavens, and market mavens, being the expert enthusiasts that they are, are likely to provide shopping information and market price to their family and friends. These users also have a great tendency to be impulse buyers, which indicates to restaurants that they can do effective suggestive selling to this market when they visit their establishments.

This corroborated with Technomic’s report, which says that 83% of their respondents recommended the restaurants to their family and friends. Additional findings that Technomic had in their August study was that a substantial number of coupon buyers use the coupons at restaurants that they have never tried before, and that these people are more likely to make a review of the establishment at their Facebook page, at Zagat survey, or at Yelp.

Other issues that restaurants are struggling with regarding daily deals include the fact that while these online sites may drive traffic and increase sales, they can also take away sales from the restaurants’ existing customers; the traffic it brings may crowd out the restaurants’ full paying guests; and that the deals themselves may harm the restaurants’ margins or tarnish its overall reputation.

What causes the conflict is, of course, the reality that consumers love them, and daily deal sites are slowly becoming a dynamic presence online. Restaurants can carefully include daily deals in their marketing plans, taking great consideration of the benefits they could gain in the transactions, as well as the possible setbacks.