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Tuesday, September 13, 2011

Does Groupon Hurt a Restaurant's Ratings?

Posted By on Tue, Sep 13, 2011 at 8:09 AM

Does Groupon bring out the trolls?
  • Does Groupon bring out the trolls?

The selling point of daily deal sites like Groupon and LivingSocial has long been that they bring in new customers and new revenue. Though there's concern that the online-deal market is saturated, deal sites may bring in as much as $1 billion in revenue this year. But is new business all the deals bring in to a given business? As a blog post yesterday on MIT's Techology Review reports, a study from researchers at Boston University and Harvard, deals might bring in new Yelp critics as well.

The three researchers followed 16,000 Groupon deals in 20 cities, tracking how Facebook helped boost sales of the deals. However, as Groupon users registered their experience with a participating business on Yelp, its overall rating went down:

[The researchers'] most controversial finding is that a Groupon deal seems to have an adverse impact on reputation as measured by Yelp ratings. Their analysis shows that while the number of reviews increases significantly due to daily deals, average rating scores from reviewers who mention daily deals are about 10% lower than scores of their peers.

What's the reason for the decrease in positive comments? Is it the fact that daily deals reach new customers outside a business's natural target audience? Are we contemptuous of businesses that offer a discount? Is the Yelp-score dip permanent, or will subsequent coupon-free months restore it to its previous level? Unknown.

What is more important to businesses than a half-point drop in a Yelp rating is a longer-term increase in revenue. If deal sites can offer that, they have nothing to fear.

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Follow me at @JonKauffman.

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Jonathan Kauffman


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