

The effect of Groupon promotions on Yelp ratings - eggspurt
http://mybiasedcoin.blogspot.com/2012/03/groupon-effect-on-yelp-ratings-guest.html

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JohnTHaller
Interesting data and conclusions in there. And it's not really surprising
given what I've learned about Groupon customers from their behavior at brick
and mortar businesses owned by some friends here in NYC. They classify Groupon
users as demanding+cheap, meaning that they aren't willing to pay full price
for much of anything (and unlikely to return unless given a similar deal) and
far more demanding (special requests, asking for free extras, etc) than their
customers who pay full price. Not one of them will ever do another Groupon
promotion.

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mike-cardwell
From the opposite perspective, I have found that owners of business treat me
as a second class customer when I use a Groupon voucher with them. There is
either an automatic assumption that I'm cheap and a less worthy customer, or
they have overbooked their services and provide a poor experience.

Maybe the problem is your friends became resentful because they were incapable
of handling the promotion, so they blamed the customers to protect their own
egos?

Not all of my Groupon experiences have been bad. I did a scuba diving
experience, which lead to me doing additional scuba qualifications and
experiences with the same group, at full price.

~~~
JohnTHaller
Most of my friends who use Groupon have automatically defended Groupon users
and blamed the businesses without knowing any of the story. Most of my friends
who use Groupon regularly are, honestly, kind of cheap (you know the ones...
who always cause an issue at the end of eating out with a group of people when
it's time to split the check and leave a tip).

One business I know of had no predisposed opinion of Groupon users (they
aren't tech savvy and never heard of it before doing it at the suggestion of a
friend) and regularly does discounts for seniors and students as well as deep
"first visit" discounts for Yelp users where they ran a promotion. They even
did a similar promotion for NYC businesses with a similar deep discount to
Groupon. They said that the Groupon users were, without fail, the most
demanding of any group of promotion-using customers and some even made it
obnoxiously clear that they would never use my friend's services without a
similar discount in the future. Of all the Groupon users, not one became a
repeat customer. In every other promotion they have run, they have gotten
numerous repeat customers, including the similarly deep discount program for
NYC businesses. So, they never plan to use Groupon again and have warned their
fellow local businesses away from it.

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sliverstorm
Probably an important difference would be that while Yelp users are almost by
definition looking for new experiences, Groupon users are likely to be either
people looking for cheap new experiences, or people looking for any cheap
experiences. I mean, be honest, if price wasn't regularly a big deal to you,
would you spend much time on Groupon, where the options are drastically more
limited?

That is to say, the difference between running a promotional discount in a
regular magazine, and running a promotional discount in a coupon magazine.

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drumdance
I use Groupon for experience discovery. I could spend time combing Yelp for
new restaurants (and sometimes I do), but it's nice to hear about a new one
through Groupon.

~~~
bunderbunder
Perhaps, but it also means that the pool of potential new experiences is being
limited to businesses that just did a Groupon. I'm sure results vary widely,
but in the aggregate that probably has implications for what can be expected
of both the seeker and the provider of said new experience.

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losvedir
I definitely believe this. I had a bad experience at a restaurant at which I
used a Groupon simply because the food took a long time, the servers were
constantly rushing around and couldn't attend to us, etc. Eavesdropping a bit,
it was clear most of the customers there were using the Groupon and the place
wasn't used to that kind of volume.

~~~
codesuela
this. I bought a Groupon once for a small restaurant and among about 12
customers there was just a single one who ordered conventionally. The
restaurant was at capacity and was really small but they sold around 8000
Groupons and when I visited a couple months have passed and it was still
completely full with Grouponers. Even though it was cheap as hell (18 EUR all
you can eat tapas for 2 people) I won't go back there because the food made me
sick.

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dazbradbury
One of the comments on the blog perfectly sums up what would have been my
hypothesis, so I will simply repeat it here:

    
    
        Part of the drop may be due to Groupon inducing 
        people to visit a business selling something 
        they otherwise wouldn't be interested in. 
        E.g., I might check out a Greek restaurant 
        even though I'm indifferent to Greek food because 
        of a good deal and curiosity. Given the same 
        experience as someone who likes the cuisine, 
        I might then give a lower rating.
        - Anonymous
    

[http://mybiasedcoin.blogspot.com/2012/03/groupon-effect-
on-y...](http://mybiasedcoin.blogspot.com/2012/03/groupon-effect-on-yelp-
ratings-guest.html?showComment=1333075513809#c8753365250508256036)

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ForrestN
Are people reading the complete article? I take the author not to be claiming
that this happens because Groupon sucks. In fact, I think only the third
hypothesized reason of five for the decline is actually a problem for Groupon.
The fact that Groupon users may be more critical in Yelp reviews is only an
indirect problem (ie. people don't want their Yelp reviews to go down), but
isn't evidence of a fundamental problem with the model.

But the article suggests a number of very plausible reasons that have nothing
to do with bad experiences. Further, as they say, until the compare these
effects with any influx of customers, there's absolutely no evidence that
Groupon isn't actually performing better with this metric than, say, running
an ad in the paper, or getting featured on Oprah.

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michaelhoffman
Such a plot really needs error bars. It's possible that the difference is not
statistically significant.

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Jabbles
Error bars on what? The ratings themselves can be measured with perfect
accuracy, and the results were averaged over 5000 merchants, so any error in
the mean would be too small to see.

~~~
orijing
It's true that the average clearly moved, but the author was trying to make a
generalized inference from the average, that there was a structural break in
the "true average" insofar as the measured average is just a sample/noisy
measurement of the "true average". Therefore, error bars/confidence bars would
indicate how likely the structural break in measured outcomes is to reflect a
structural break in the underlying "true average."

The volatility/variance comes from the fact that 1. not everyone rates their
experience, 2. there's variability in the experience, 3. different people have
different expectations or likelihood to rate high/low, etc.

I hope that clarified what I believe was the parent's meaning.

~~~
MBCook
That break at day 0 was because they reset the moving average calculation on
that date.

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sanj
Whenever a Groupon deal appears at a place that I already frequent, my heart
sinks a little. I know that I can look forward to crowded seating, poorer
service, and harried staff for the next three months or so.

I've thought about how to fund a reverse-Groupon: a service where I can pay
places to NOT take part.

~~~
astrodust
I want to fund a "GroupOff", the opposite of GroupOn.

You pay more. Sometimes a lot more. Yet you get something extraordinary in
return. What would that be? It's up to the vendor.

It'd probably have to work something like Kickstarter if there were different
premium perks, or just a one-shot thing. It'd give mid-range restaurants a
chance (and budget) to pull out all the stops for a special VIP night, for
instance.

Nothing says to your retailer "I hate you and I want you to die" more than
using a GroupOn coupon.

~~~
jsemrau
>You pay more. Sometimes a lot more Well, strange concept. Since every
experience at a restaurant is carrying a risk of not enjoyment, I guess many
people would not be willing to increase their risk by paying more. On the
other hand, usually becoming a regular should lead to better service.

An anecdote from my life. I never used to eat uni (sea-urchin) in my local
Sushiya here in Tsukiji. However, at some stage the Sushi-chef recommended it
to me free of charge since it was season and he wanted to offer me a special
treat. Since I liked the taste I regularly add uni to my order. Just by giving
me this one uni for free he increased his revenue from me by 10 USD.

[Edit] So the lesson's learned here should be "Know thy customer"

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jrockway
This pretty much coincides with my experience; when I'm with a group of
friends and we are using a Groupon, we get about 1 star less worth of service.
(I've never used one on my own; I'd rather pick the restaurant on my own
rather than being told where to go buy whoever happened to feel like buying an
ad that day.)

That's why I don't get the Groupon hype. It seems like a way for businesses to
pay money to upset customers. Probably a bad idea.

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hammock
I wonder if the cost-benefit balances out on this one. Obviously it varies by
retailer/restaurant.

I'm not just talking about the incremental sales<->lower ratings tradeoff,
either. According to the paper's abstract, running a groupon ad earns you a
significant amount of new reviews - new ratings which tend to be 10% lower on
average. But is it more valuable to have a lot of "very good" reviews, or a
small number of "excellent" reviews?

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captjohnr3
Groupon Spams the internet with cut rate, deceptive advertising, that is
killing the legitimate scuba business in Florida.
[http://www.scubaboard.com/forums/new-divers-those-
considerin...](http://www.scubaboard.com/forums/new-divers-those-considering-
diving/417214-groupon-deal-course-recommended-5.html)

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hedgehog
This is one of my favorite blogs, it's worth reading the archives for the
material about CS and statistics.

