Popularity Information May be a Lifesaver For Online Group-buying Deals
CHICAGO, April 14, 2014 /PRNewswire-USNewswire/ -- The more popular group-buying deals such as those offered on websites like Groupon.com and LivingSocial.com are, the more likely they are to be purchased and the sooner they are to be redeemed, a recent study finds.
Remember when Groupon was all the buzz just a few years ago? Today, as excitement about group-buying deals cools, the industry is fraught with criticism about the sustainability of its business model. For those unfamiliar with group-buying deals, they are products or services that stores offer for a discounted price on group-buying websites. For example, Starbucks once offered gift cards for a bargain on Groupon.com. What is unique about these deals is that they must be purchased in advance, usually within a certain window of time. Yet once purchased, deals often cannot be redeemed until a later date, and can expire if they are not redeemed in time.
Information about a deal's popularity may be what saves the industry, according to researchers. To find out what determines whether people will buy a deal and how soon they would actually redeem it if they buy it, researchers studied the purchase and redemption records of over 30,000 customers of a group-buying website. In their analysis they included information about how popular a deal was by noting the number of deals that had already been sold – a number that is posted on the website so that each customer to the website can clearly see it when they decide whether the buy the deal or not. What the researchers found was intriguing. First, the more popular a deal is, the more likely people are to buy it. This makes sense, the researchers explain, since information about a deal's popularity says something about its quality. This is especially so for things whose quality can't be tested before purchase –food and massages are examples. That is why many people check the reviews and ratings of things before they buy them online. But what about when people actually redeem deals? Interestingly, a deal's popularity plays a role in that decision as well. In fact, the more popular a deal is, the sooner people are likely to redeem it. That "deal popularity can stimulate sales and accelerate redemption" is even more likely for customers who recommend deals to others and for deals that can be used with other people (such as dinner entrees for 4 people). The analysis appears in the March issue of the American Marketing Association's Journal of Marketing.
The researchers suggest that managers of group-buying deals and website platforms consider making information about a deal's popularity more visible to potential buyers, and that they incentivize people to recommend deals to others. The researchers also note that offering deals that can be consumed in a group may see higher purchase and quicker redemption rates.
Regret that you don't redeem a group-buying deal in time? The next time you consider buying one, check how popular it is first. The more popular it is, the sooner you may be able to redeem it.
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SOURCE American Marketing Association