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How Good Groupon Leads to Bad Yelp

(Photo: Groupon)

A paper by Georgios Zervas, John Byers, and Michael Mitzenmacher explores the relationship between a Groupon surge (like when a small bakery has to make 100,000 cupcakes) and a drop in Yelp ratings. Tim Worstall at Forbes explains:

Imagine that you are an enthusiastic and regular consumer of the finest chimichangas that you can find. You’ll likely have scoped out your neighbourhood, tested the chimichangas on offer and zeroed in on those places that make excellent ones. You might even provide reviews on Yelp pointing other enthusiasts for the comestible so as to guide them to the good places.

Now imagine that you’re not actually very worried about or interested in chimichangas. Or even, as with myself, not entirely sure what they are. And you see a Groupon deal offering, say, 50% off at Jimmy’s Chimichangas and you take it up. Heck, why not, it’s a good way to try them out with a decent saving attached. But if you’re uninterested, not sure what it is that you’re about to get, it’s not all that difficult to imagine that your subsequent Yelp review is less than glowingly enthusiastic.

If you prefer, a Groupon is going to attract in the marginal customers for whatever it is. And marginal customers are likely to be less enthusiastic simply because they are marginal customers. They’re marginals because the basic offering is not exactly aligned with their interests: thus the finding that marginal customers find the offering not exactly aligned with their interests or tastes is not entirely a surprise.

(HT: Mark McCrery)