A Study of the Group Buying Feature of Social Coupons Using Augmented Clickstream Data

Abstract

Groupon pioneered a new business model which combines the features of daily deals and group buying. This so-called social coupon industry has experienced explosive growth in recent years. In this paper, utilizing a large proprietary dataset of Groupon users, the authors develop three hypotheses about how the group buying features affect consumer behavior. This study is the first to empirically investigate social coupon-related consumer behavior based on detailed consumer-level data. Their findings are as follows: (1) contrary to their theoretical predictions, group buying does not stimulate referrals, no matter whether the deal is tipped (enough people have purchased the deal before it kicks in) or not; however, (2) the information from the deal that is tipped increases deal purchase probability by removing a consumer’s uncertainty about whether the deal will eventually tip and it accelerates deal purchase speed; and (3) the information from prior purchases affects an individual’s purchase decision through the mechanism of herding rather than social learning. These findings together suggest that the group buying features of social coupons change consumer behavior and affect sales. This study also provides an example of using web analytics tools to augment clickstream data and consolidate information from other sources.