A third of businesses don’t make money from promotions on socially charged buying site Groupon, says a new study reported by Inc.com.
Consumers who use the deal-of-the-day web site don’t make return visits to the businesses offering discounts, don’t spend much and don’t tip well, says the study from Rice University’s Jesse H. Jones Graduate School of Business.
“I think these findings show that social promotion companies need to better balance consumer appeal with positive outcomes for the small businesses offering them,” study author Utpal Dholakia, an associate professor of marketing at the business school, said in a statement. “Right now, these deals are tilted too far in consumers’ favor.”
Dholakia surveyed 150 businesses in 19 U.S. cities and 13 product categories that ran and completed Groupon promotions between June 2009 and August 2010. The barely three-year-old startup — which has spawned loads of copycats — is valued at more than $1 billion, and features about 330 deals in more than 230 markets worldwide.
Though some 40 percent of businesses said they wouldn’t do a social promotion again, two thirds of the businesses did earn profits with Groupon.
In the service category, spas and salons fared the best, and restaurants fared the worst.
Photo by Groupon.