The effect of Groupon promotions on Yelp ratings • Hacker News Board

Re: The effect of Groupon promotions on Yelp ratings

#11

Post by ForrestN » Sun, Apr 08, 2012, 6:52 PM UTC

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.

Re: The effect of Groupon promotions on Yelp ratings

#12

Post by JohnTHaller » Sun, Apr 08, 2012, 7:05 PM UTC

mike-cardwell wrote: post #5

JohnTHaller wrote: post #3

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 request…

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 th…

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.

Re: The effect of Groupon promotions on Yelp ratings

#13

Post by gzervas » Sun, Apr 08, 2012, 7:11 PM UTC

michaelhoffman wrote: post #7

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

You're right, statistical significance is a valid concern but error bars is not the way to go. Check the paper for a rigorous analysis. We are not drawing our conclusions from a single plot.

Re: The effect of Groupon promotions on Yelp ratings

#14

Post by MBCook » Sun, Apr 08, 2012, 8:00 PM UTC

orijing wrote: post #10

Jabbles wrote: post #8

Earlier quoted context omitted.

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.

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…

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

Re: The effect of Groupon promotions on Yelp ratings

#15

Post by michaelhoffman » Sun, Apr 08, 2012, 8:03 PM UTC

gzervas wrote: post #13

michaelhoffman wrote: post #7

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

You're right, statistical significance is a valid concern but error bars is not the way to go. Check the paper for a rigorous analysis. We are not drawing our conclusions from a single plot.

I didn't think that you were (and having glanced at the paper now, there seems to be a lot more meat to it), but I think others will see only the plot. In my opinion, such a plot is misleading given the large variance I would expect in the rating.

Re: The effect of Groupon promotions on Yelp ratings

#16

Post by dazbradbury » Sun, Apr 08, 2012, 10:38 PM UTC

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...

Re: The effect of Groupon promotions on Yelp ratings

#17

Post by hammock » Sun, Apr 08, 2012, 10:50 PM UTC

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 saleslower 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?

Re: The effect of Groupon promotions on Yelp ratings

#18

Post by sanj » Mon, Apr 09, 2012, 12:20 AM UTC

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.

Re: The effect of Groupon promotions on Yelp ratings

#19

Post by astrodust » Mon, Apr 09, 2012, 12:44 AM UTC

sanj wrote: post #18

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.

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.

Re: The effect of Groupon promotions on Yelp ratings

#20

Post by sliverstorm » Mon, Apr 09, 2012, 1:31 AM UTC

JohnTHaller wrote: post #12

mike-cardwell wrote: post #5

Earlier quoted context omitted.

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 th…

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…

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.