Groupon: Pay Us Money to Get Deals You Get in the Mail for Free!

Posted by Dan Keeney

When you consider the time value of money, is this a good deal?First, I need to admit that I am a customer of Groupon. I have purchased some great meals. I have also used Living Social to pick up some bargains, including the photo shoot that resulted in that wonderful photo over there in the sidebar on the right from Payge Stevens Photography.

Now that disclosure is complete, I have a simple question resulting from today’s Groupon deal for Dallas/Fort Worth. For $8 you can purchase a shampoo and haircut at Great Clips. Great deal — unless you consider that Great Clips has an ongoing and very aggressive coupon strategy. A few times each month I can expect to receive a coupon for Great Clips in the mail, ranging from $7 to $9 for a haircut.

So why would someone (as of this moment Groupon is reporting 1,600 people have purchased) pay up front to basically get the same deal they would otherwise receive in the mail?

Interesting psychology at play, I suspect. The sense of urgency, which is amplified by the ticking clock that shows how much time is left down to the second, is clearly a factor. The sense of “it has to be a great deal or everyone else wouldn’t be doing it” also contributes, I suppose.

I’d love to hear from the marketers who have insight into what prompts a person’s buying decision in these situations. All the factors seem to align closely with what you see on the TV shopping channels. Great image, sense of value, urgency, etc.

A few weeks ago I was excited to purchase a $25 certificate to Humperdink’s for $10. I was especially excited about the prospect of going to the Humperdink’s in Arlington before a Ranger’s game. That thought is what prompted me to click and buy.

But then the following day I saw a coupon in the Dallas Morning News for a free entree with the purchase of an entree at Humperdink’s. So I shelled out money upfront for what amounted to the same deal I could get without paying anything. Doh!

If you don’t consider the time value of money, I don’t suppose that’s such a big deal, but the fact that consumers are being asked to fork over their dough for the promise of something in the future is significant. That money that you are spending with only a certificate in return is gone. All the other things you could have done with that money between the time you spend it and use the certificate are also gone. That is your opportunity cost.

Okay, before I get into a big economics discussion, I’ll wrap this up.

From now on, I only check Groupon for deals I never see anywhere else. I recently bought a Groupon for Feedstore Bar B Que, which is a terrific tiny local place in Southlake that never advertises. Perfect. But no more paying up front for deals I can get for free.

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This entry was posted on Friday, May 6th, 2011 at 1:57 pm and is filed under Random. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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