A new study by Boston University and Harvard suggests that merchants who participate in daily deal promotions offered by companies like Groupon and LivingSocial lead, on average, to a 10% decrease in their Yelp rating, or the equivalent of half a star. The study, "first reported on MIT's Technology Review
, "Daily Deals: Prediction, Social Diffusion, and Reputational Ramifications
" analyzed the data of more than 19K daily deals [ Groupon (16,692) and Living Social (2,609) ] in 20 cities between Jan. 3 and July 3, 2011, and more than 56K reviews of more 2K+ merchants who ran the same number of deals on Groupon."
According to Launch
"After a company runs a daily deal through Groupon or Living Social it can expect a Yelp star decline of 10% -- despite a 44% increase in the number of Yelp reviews if it already had at least one...Average rating scores by reviewers who mention daily deals are on average 10% lower than their counterparts -- those reviews that specifically mention both "Groupon" and "coupon" were 20% lower on average..."
A spokesperson for LivingSocial responded to Launch's request for comment by saying the study's sponsors did not have access to their internal data and therefore it should be "treated with deep skepticism."
In light of this information do you think business owners should or shouldn't participate in daily deal promotions offered by companies like Groupon and LivingSocial? What would you do? Leave you comments below.
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