'Daily Deal' Site Users Are More Critical Customers

By February 21, 2012
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Companies which make daily deal offers often score lower ratings on review sites than others because daily deal site customers are more critical, more willing to share their opinions, and leave less scope for companies to filter out negative postings.

Groupons and other promotional offers on the Internet could damage the online reputation of a business. This at least is the finding of a study* in the US which looked into the relationship between the use of Groupon offers and the Yelp (review and recommendations site) ratings given to businesses using Groupons. Businesses which don’t offer daily deals have a mean score of 3.73 stars on Yelp, as opposed to 3.27 stars for those who do, a phenomenon the researchers call the ‘Groupon effect’. There seem to be three reasons for this. First, the negative Groupon effect stems from the fact that daily deal users are more open than others to experimentation. In addition, they tend to be more critical than other customers towards the businesses whose services they experiment with and more inclined to voice their criticisms. In fact on average they share their opinions more readily than customers who don’t use these offers and back up their views with longer, more detailed explanations. These more detailed postings are valued more highly on review sites.

Are the reviews genuine?

A second reason for this assessment gap surrounds just who is posting his/her view. Companies tend to filter their reviews on review and recommendation sites and, even worse, some even hire people to post glowing reviews on that company and rubbish their competitors. These practices make it more likely that an ‘opinion’ on a company may be totally artificial, serving to inflate the company’s mean rating. In contrast, votes posted on companies making promotional offers more often come from genuine customers who write more honest reviews and recommendations and give ratings which more realistically reflect the true performance of a given company.

Daily deals shoring up failing businesses?

The third reason has to do with the companies themselves. The study finds that providers who offer Groupon deals are mostly businesses in difficulty. Moreover, these businesses tend to make offers on the daily deal site which differ from those aimed at other customers. The study tells the story of a retailer that actually charged higher prices for its Groupon ‘deal’. Such practices are bound to have some impact on the apparent discrepancy between the online reputations of companies which offer deals and those which don’t. However, while there is some empirical evidence of this third factor, the authors found that its overall impact is not huge. It seems to be a combination of the three factors that makes the difference.

*carried out by J.W.Byers, M.Mitzenmacher, and G.Zervas

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