The groupon effect on yelp ratings: a root cause analysis
Proceedings of the 13th ACM Conference on Electronic Commerce
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The emergence of the daily deals online marketplace has been an e-commerce phenomenon that has engendered remarkable stories of rapid growth, exemplified by firms such as Groupon and Living Social. At the same time, critics have accumulated considerable evidence, largely anecdotal in nature, of incipient failure of this marketplace. Our recent empirical work has attempted to reconcile these divergent viewpoints through quantitative evaluation, in an effort to understand the sustainability and long-term outlook of the daily deals business model. Our methods draw from a rich tradition in marketing and econometrics to study the interplay between promotional offers, word-of-mouth engagement, and consumer satisfaction. Leveraging datasets we collected encompassing tens of thousands of daily deals offers and millions of Yelp reviews, we have quantified the significant extent to which daily deals users express dissatisfaction with today's offers, and elaborated the root causes underlying this behavior. We discuss the broader implications of our methodology and the managerial implications that follow from our root cause analysis, both for daily deals merchants and daily deals services, that could lead to a viable marketplace and improved consumer satisfaction.