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Groupon and Groupon Now: Participating Firm’s Profitability Analysis

Author

Listed:
  • Jenn-Bing Ong

    (Nanyang Technological University)

  • Wee-Keong Ng

    (Nanyang Technological University)

  • Artem Vorobev

    (Tyumen State University)

  • Thanh-Nghia Ho

    (Nanyang Technological University)

Abstract

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 ( $$\gtrsim $$ ≳ 50%) in large portion when their products or services are less well-known or less popular; and use moderate discount rates, deep discount rates (

Suggested Citation

  • Jenn-Bing Ong & Wee-Keong Ng & Artem Vorobev & Thanh-Nghia Ho, 2019. "Groupon and Groupon Now: Participating Firm’s Profitability Analysis," Computational Economics, Springer;Society for Computational Economics, vol. 53(2), pages 617-632, February.
    • Handle: RePEc:kap:compec:v:53:y:2019:i:2:d:10.1007_s10614-017-9736-y
    DOI: 10.1007/s10614-017-9736-y
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    References listed on IDEAS

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    1. Mark Bils, 1989. "Pricing in a Customer Market," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(4), pages 699-718.
    2. Jiahua Wu & Mengze Shi & Ming Hu, 2015. "Threshold Effects in Online Group Buying," Management Science, INFORMS, vol. 61(9), pages 2025-2040, September.
    3. Benjamin Edelman & Sonia Jaffe & Scott Duke Kominers, 2010. "To Groupon or Not to Groupon: The Profitability of Deep Discounts," Harvard Business School Working Papers 11-063, Harvard Business School, revised Jan 2014.
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