Economic motivations of listing on Groupon

Abstract

Online social coupon websites have been creating a huge buzz in recent years. These

online social coupons are similar to traditional coupons; but are purchased online and

have an added group-buying effect in which a minimum number of online buyers is

required for the transaction to go through.

The growth witnessed by the online coupon industry has been undeniably large and

many firms have jumped on the bandwagon to enter this lucrative business. However,

does this popularity translate into long term profits for merchants? In view of this global

phenomenon, we seek to analyse the economic motives of vendors enlisting the services

of Groupon, one of the pioneer entrants and a major player in the social coupon scene.

Drawing upon the data we collected from Groupon, a regression was performed to test

if discounts varies across brand establishment, durability, experience goods and also to

investigate the relationship between the amount of discounts for different product

categories and the price elasticities of the products. Literatures of similar nature were

included to provide a wholesome view and also serve as a point of reference.

Based on our regression results, we conclude that both economic motives were central

for vendors to list on Groupon. However, between the two, advertising seems to be the

more compelling reason as most vendors seek to employ this channel to induce brand

awareness among consumers.