A Theory of Social Coupons
YALE Customer Insights Conference
May 11, 2013
Upender Subramanian, Asst. Prof of Marketing
Jindal School of Management, University of Texas at Dallas
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Overview
• In many (online) markets buyers are uncertain about the
quality of sellers
• An online platform can enable buyers to potentially learn
from each other – aka “social learning”
– E.g, Online forums, reviews, sales ranking, Facebook likes, Tweets…
• When & why should a platform enable social learning?... And
to what degree?
• Today’s talk: Study this in the context of daily deals
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Daily Deals Example
• Offered by small and local businesses
• Publicize business to an audience of potential (new) customers
• Offers significant discount to entice consumers
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“Social Coupons”
• Daily deals may also reveal how many vouchers were sold
• Can influence consumers’ perception about the deal
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Social Learning… in Pictures
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Social Learning… in Pictures
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Social Learning… in Pictures
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Social Learning… in Pictures
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Social Learning… in Pictures
100
people bought
BUY
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BUY
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Social Learning… in Pictures
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Social Learning… in Pictures
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Social Learning… in Pictures
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Evidence of Social Learning
Industry Quotes
Groupon - Statement on Approximating the Deal Counter
As customers, we like the counter because it indicates how popular deals
are. But some clever people are using the counter to make (consistently
incorrect) estimates of our total company sales, which we don’t like for the
same reason you probably wouldn’t like if people tried to guess your weight
all day. This change is meant to continue to reflect deal popularity while
making it clearly impossible to predict our sales.
Troopswap - Field Experiment (VP of Research)
We were considering removing the deal counter which displayed the number
of purchases on our daily deal website. We were concerned that the
counter was having a negative impact on the consumers' perception of the
deal. When we A/B tested the counter, we found that it had a significant
and positive impact on purchases, particularly for female buyers. As a result
we decided to retain the counter.
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Evidence of Social Learning
• Observational Field Study (4-week Groupon data)
– Hourly incremental sales correlated with past sales
– Correlation higher when…
… average sales level are lower
… deal price is higher, discount is lower
… fewer online reviews, lower review rating
• Experimental Study (Undergrad students)
– Evaluated two deals, 2 x 2 between subject design
• [Hi Sales / Low Sales] x [Sales Revealed / Not Revealed]
– More likely to consider buying the deal if it was popular
– More likely to delay buying decision if sales would be revealed
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A Model of Social Learning
Key Assumptions
• Online platform connects sellers to consumers
– Sellers set price, platform takes a % of sales
• Consumers are uncertain about quality of sellers
– Each has an opinion, which in the aggregate is informative
– Consumers are similar in how the value quality
• Platform can enable social learning by revealing sales
• Consumers can wait to see this information
– But returning to the website is a hassle
– Some consumers are too busy for this
– Others face “hassle cost”, must decide whether to return
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Main Findings: Consumer Behavior
• Order emerges: Higher sales is indicative of a higher
merchant quality
– Social learning emerges as a natural & consistent behavior
– Allows study of how firm + market factors impact social learning
• Nature + extent of social learning depends on price
– Influences whether and who engages in social learning
– Social learning may unravel when price is high
=> Must lower price to enable social learning
• Social learning can stimulate or suppress sales
– People with favorable opinion about the deal may delay their
buying decision to observe others
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Main Takeaways: Platform Implications
• Social learning can be a double-edged sword
– May unravel when consumers anticipate social learning
• Revealing sales increases website visits…
• … but is profitable to reveal sales if consumer uncertainty
about merchant quality is neither too high nor too low
• “Sweet spot” in extent to which to enable social learning
– Reminding consumers to return to website can be counterproductive
– Making deal counter more informative can be counterproductive
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Questions ?
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