Decision Making Analysis

Every day a big new deal-that's the appeal of bargain-a-day web sites like Groupon, LivingSocial, Google Offers, and KGB Deals. Although the details vary from site to site, the idea is the same: Consumers click to buy a coupon good for a deeply discounted deal on a national or local product or service. One day, the featured deal might be a specialty pizza for 50 percent off the regular price; the next day, it might be a custom photo book for 75 percent off the regular price-or even 90 percent off. Offers are typically valid for only a day or two. The list of marketers offering deals goes on and on: bakeries and boutiques, spas and stores, clothing companies and cafes have used deal sites to attract new customers who might otherwise not give them a try.

Of the deal sites, Groupon has the largest reach and fastest growth, with 143 million e-mail addresses in its global database and 78,000+ participating merchants in more than 40 countries. Competitor LivingSocial, which often posts deals on "social experiences" such as restaurants and travel destinations, is steadily expanding within the United States, Canada, and the United Kingdom. Another deal site, KGB Deals, is increasingly popular in the United States and Europe. Google Offers-one of the newer sites-aggregates deals from a number of different sites eager to ride the wave of Google's worldwide brand recognition. With its digital marketing expertise, Google Offers is especially focused on matching consumers with appropriate offers in their local area. "We believe that people want more deals that are personal to them," an executive explains. For a better match, Google invites consumers to take a "personalization quiz," indicating which categories of deals (shopping, food and drink, kids and family, and so on) interest them.

A few years ago, when deal sites were in their infancy, the eye-popping introductory offers got consumers buzzing and drew crowds of bargain hunters. Consumers tried a new service provider or product, evaluated the results, and then figured out whether to buy from that marketer a second time. If the initial experience was positive, consumers might be willing to buy at full price. But even if they weren't completely satisfied, consumers would have been able to sample the offer without spending very much.

Soon companies large and small jumped on the deal-a-day bandwagon to bring in newcomers, hoping that these customers would be so happy that they would ultimately become loyal purchasers. Marketers also looked forward to selling dealseekers additional goods or services and encouraging them to upgrade to more expensive offerings. Often the first deal was a money-loser for the marketer, an opportunity to establish a relationship with hordes of new customers that might, in time, lead to profits and word of mouth referrals.

These days, some industry experts worry that "deal fatigue" is setting in as consumers sign up for multiple deal sites and receive offer after offer in their emailboxes or via mobile apps. Now, to combat competitors and build loyalty, industry  leader Groupon is adding a frequent-buyer program and testing new categories of offers. Still, marketers are concerned that deal-a-day regulars will become so accustomed to deep discounts that they won't buy unless they believe the price is as low as it can possibly go. Meanwhile, marketers have no guarantee that they'll wind up with as many repeat buyers as they expected, and many disappointed firms are steering clear of deal sites. How will deal-a-day sites fare in the future?

Case Questions:

1. Once a consumer has used a deal-a-day site, how are learning choice tactics likely to affect their subsequent decisions?

2. In what way might deal sites affect the zone of acceptance for a product or category? What are the implications for marketers?

3. Is it reasonable for a marketer to expect that a consumer who is loyal to a different brand would switch to its brand after trying a deeply discounted offer on a deal site? Explain your answer.

4. What role do you think variety seeking plays in a consumer's decision to use deal-a-day sites?