Understanding the Purposes – and Weaknesses – of Online-to-Offline Discounting. PYMNTS.COM. October 26, 2011.
Daily deals sites often promise discounts exceeding 50% — mobilizing millions of consumers spending billions of dollars. Yet this model faces growing resistance, particularly from merchants concerned that “deals” offers are unprofitable. The natural question: When and how are large discounts sustainable?
Deals services seem to envision delivering new customers who return paying full price, yet they’ve done little to demonstrate that return visits actually occur. And there’s reason to doubt whether customers enticed by a discount will actually return to pay full price. I explore the implications, including the requirements for a profitable discounting model grounded in price discrimination rather than full-price return visits.