October 3rd, 2011 • Posted by KitKat • Permalink
Launch Media reports on a new study conducted at Harvard and Boston University that finds businesses running a Groupon or Living Social offer can expect a 10% decrease in their Yelp star rating.
The results of the study perfectly illustrate what happens when restaurants compete purely on price. Daily deals often result in unique, price conscious consumers who are less loyal and inconsistent. Equally important, these consumers are also more likely to give your restaurant a lower rating. What makes this ironic is that Groupon won't work with many restaurants until they have earned a substantial number of consumer reviews on websites like Yelp. It's an advantageous relationship for Groupon because they use your restaurant's online reputation to sell their coupons.
Daily deal sites must stop claiming that the offers will help "jump start" a new business because the deals deliver consumers who are less interested in a specific restaurant and more focused on the price they'll receive on the deal.
Remember, these consumers receive your deal one day and the next they'll be given a competitor's offer. In addition, new restaurants have fewer Yelp reviews so offering a daily deal would likely slide their rating down farther than an established business. Daily Deals are not the way to get valuable customers through the door.
