Abstract

Groupon has become the latest Internet sensation, providing daily deals to customers in the form of discount offers for restaurants, ticketed events, appliances, services, and other items. We undertake a study of the economics of daily deals on the web, based on a dataset we compiled by monitoring Groupon over several weeks. We use our dataset to characterize Groupon deal purchases, and to glean insights about Groupon’s operational strategy. Our focus is on purchase incentives. For the primary purchase incentive, price, our regression model indicates that demand for coupons is relatively inelastic, allowing room for price-based revenue optimization. More interestingly, mining our dataset, we find evidence that Groupon customers are sensitive to other, “soft”, incentives, e.g., deal scheduling and duration, deal featuring, and limited inventory. Our analysis points to the importance of considering incentives other than price in optimizing deal sites and similar systems.