Recent research shows a correlation between daily deals and negative online reviews. Researchers from Harvard and Boston University conducted a study of over 16,000 daily deals in 20 US cities from Groupon, one of the more popular daily deal sites. In addition to monitoring the sales of these deals, they kept track of the number of Facebook likes that each deal generated.
Throughout the same timeframe, they tracked the reputations of the 2,332 merchants via 56,000 Yelp reviews to determine changes in reputation.
In addition to determining the profitability of these deals, researchers found a significant increase in online reviews associated with them. More controversially, they found that these ratings showed a marked decline in the average scores of the reviewers mentioning purchasing the company’s product through a daily deal.
Reviews specifically mentioning the words “coupon” or “Groupon” were examined in even more detail. According to researchers “Reviews mentioning either keyword are associated with star ratings that are 10% lower on average than reviews that do not, while the very small fraction of reviews mentioning both keywords are more than 20% lower on average”.
What does this mean for merchants thinking of selling a deal with Groupon? The data shows that sales increase with these deals. It seems that what the retailers do with these sales is where the trouble lies. I’d venture a guess that most complaints involve the retailer not being prepared to handle the volume associated with the sale of their deal. Being equipped to deal with increased sales, mentions online, customer service requests, and website traffic are key in creating a great user experience. These deals can be a great way to increase exposure and boost business, or they can make a company fall flat if not properly prepared.
I’ve purchased a few of these deals myself, and for the companies that have set up their deals well, I’ve become a loyal (full price) repeat customer. I’ve also had a purchase go wrong with the company going out of business before I had a chance to use my voucher. I’m happy to report that Groupon did refund my money before I even knew of the closure.