Helping Merchants to Assess the Profitability of Deal-of-the-Day Promotions

Abstract

The ability to calculate and understand the profitability of deal-of-the-day promotions (DoDs) is of vital importance for merchants. It is also challenging because it requires these merchants to consider long-term, cross-selling, and cannibalization effects and select an appropriate discount for the promotion. The authors develop and implement a model as a free online calculator ( http://www.coupon-calculator.com ) to help merchants to determine the profit they can generate from these promotions. This calculator evaluated almost 3,700 DoDs from the merchants’ and providers’ perspectives. To gain insight on the expected profitability of DoDs, the authors analyzed 627 of these planned promotions and 30 realized promotions. The results indicate that two-thirds of the planned and all realized DoDs are expected to be profitable in the long term. Yet, DoDs are unlikely to pay off in the short term. The findings also show that unredeemed coupons strongly increase profit, particularly those of the provider.

Evaluating Restaurants’ Profitability of a Daily Deal Promotion

“…Reiner and Skiera [30] found that all merchants achieved a positive profit. However, this finding is driven mainly by long-term profits; short-term profits were only slightly positive.…”

Exploring Deal of the Day: an e-commerce strategy

“…Lastly, we explore whether o not there is a state of the economy effect on DOD offerings. In summary, we explore how DOD varies across multiple product categories, during festival and non-festival seasons and with the state of the economy (Boon et al, 2015 ; Gafni et al, 2014 ; Liu and Sutanto, 2012; Parsons et al, 2014 ; Reiner and Skiera, 2018 ). Therefore, we define our research questions as:Is there a significant difference in savings made by customers by purchasing different discounted DOD value offerings, i.e.…”

“…Marketers use several promotional schemes to lure buyers in online environments to make purchases and increase their purchase frequency and to establish loyalty relationships with them (Rocha et al , 2019; Sarkar et al , 2019; Yadav and Rahman, 2018). Deal of the Day (DOD) is one such promotional scheme adopted by online retailers, whereby products are offered on sale for a particular period of time (usually 24–36 h) (Reiner and Skiera, 2018). DOD helps the online retailers to boost the daily footfall on their websites.…”

“…DOD helps the online retailers to boost the daily footfall on their websites. The concept of DOD was started as social couponing by Groupon in the USA and is now adopted extensively around the world (Boon et al, 2012(Boon et al, , 2015Reiner and Skiera, 2018;Liu and Sutanto, 2012). Daily deals are part of the marketing budget, and roughly 24% of the marketing budget is allocated for such deal offerings (Gafni et al, 2014).…”