Groupon and Groupon Now: Participating Firm’s Profitability Analysis

The business model of Groupon has been categorized by many to be a case of daily deals or discount offerings to consumers. It is static (not responsive to business fluctuations and demands) and operates in batch mode (period-based availability). “Groupon Now” was proposed to be distinct from Groupon...

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Bibliographic Details
Published in:Computational economics 2019-02, Vol.53 (2), p.617-632
Main Authors: Ong, Jenn-Bing, Ng, Wee-Keong, Vorobev, Artem, Ho, Thanh-Nghia
Format: Article
Language:English
Subjects:
Behavioral/Experimental Economics
Business
Computer Appl. in Social and Behavioral Sciences
Consumers
Continuum modeling
Demand
Discount rates
Discrimination
Downtime
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Math Applications in Computer Science
Mathematical models
Operations Research/Decision Theory
Profitability
Variation
Vouchers
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Summary:The business model of Groupon has been categorized by many to be a case of daily deals or discount offerings to consumers. It is static (not responsive to business fluctuations and demands) and operates in batch mode (period-based availability). “Groupon Now” was proposed to be distinct from Groupon in that Groupon Now is dynamic and real-time. Groupon Now was conceived to be more responsive to business fluctuations—firms may choose to offer deals during business downtime and likewise withhold deals during business uptime. In this study, a time-continuum model for profitability analysis based on the two-period Groupon model developed by Edelman (Mark Lett 15, 2014 ) is introduced to compare the profitability between Groupon, Groupon Now, and firm normal operations without offering discount vouchers. The numerical experiments show consistent results that Groupon Now is only marginally more profitable than Groupon, but both are superior to the firm normal operations without offering any discount vouchers. The latter analysis is especially true if there is a high consumer demand to fulfill and the firm’s product or service is a popular consumers’ choice. Furthermore, the numerical experiments also suggest that firms offer moderate discount rates ( ≳ 50%) in large portion when their products or services are less well-known or less popular; and use moderate discount rates, deep discount rates (
ISSN:0927-7099
1572-9974
DOI:10.1007/s10614-017-9736-y