Deal or No Deal? Online Deals, Retailer Heterogeneity, and Brand Evaluations in a Competitive Environment

Abstract

Daily deal platforms, such as Groupon, peaked in the mid-2000s, by letting retailers offer 50% promotions to consumers using an app. When used right, retailers were able to get consumers to try them for the first time and build a customer base. When used wrong, retailers lost revenue unnecessarily and sometimes went out of business. Even now, in 2020, you can find lovers and haters of daily deals, and yet they remain an integral part of the marketing mix for many retailers. One lingering question about these deals remained: How do customers perceive a retailer that offers daily deals before going to the retailer? Do retailers look desperate or confident? Through a series of laboratory experiments, we test whether offering a deal changes consumers’ preconsumption brand evaluations. Our research shows that brand evaluations are contingent on the retailer type (i.e., price segment and age), the success of the current deals offered (i.e., number of page visits and purchases), and the number of competitors that are also using deals. Together, our work demonstrates specific conditions where offering deals may lead to positive or negative consumer perceptions even before arriving at the retailer.