Editor’s Note: Sam Neumark is the founder of DecodingtheDailyDeal.com, a project launched to better understand the daily deal and group commerce space.
In October 2011 Thumbtack.com released a case study that revealed a disconcerting aspect of daily deals, which was that prices may often be inflated, and that “original prices” quoted on daily deal websites may differ from the prices businesses actually charge for their products. The website went out and contacted ten businesses, inquiring about prices, and found that eight out of the ten businesses they called quoted a price that was less than they had advertised on sites such as Groupon and LivingSocial. Finding that a whopping 80% of businesses polled lied about their prices was huge news for those covering the nascent industry, and unsurprisingly hit the blogosphere like wildfire. The implications of such a revelation could have been staggering. If consumers believed that daily deal sites were lying to them about the discounts they are receiving, it could totally undermine the trust between the two parties and potentially reduce the amount of consumers buying deals.
However, there were a few issues regarding Thumbtack.com’s case study. Firstly, the number of businesses polled was a meager ten businesses, and to come up with something that represents a population of local businesses using daily deals, ten businesses is a very small number compared to the hundreds of thousands of businesses offering daily deals. The second issue with Thumbtack’s conclusions is that they failed to emphasize the fact that the businesses that they contacted were mainly businesses that did not provide “published prices” on their websites. Many of the businesses that daily deal sites feature do in fact provide prices for products on their websites, and given the due diligence that sites like Groupon claim they do on individual deals to ensure accuracy, the chances of receiving a deal with an inflated price should be greater when using a site that does not publish its price.
Propelled by Thumbtack’s revelations, we conducted a similar case study to that of Thumbtack, but increased the sample size to 100 businesses using Groupon, and focused solely on businesses that did not provide prices for their products on its website.
The results from the case study were pretty staggering, and confirmed the fact that businesses using daily deals that don’t publish their prices on the web, may inflate the true “value” of their good or service when using a daily deal. For every business we called, we requested the original price, and if they were running any sort of promotion at the time we always asked for the normal non-discounted rate and recorded that as the quoted price. Out of the 100 businesses we contacted, 43 of them quoted to us prices that were at least 10% less than the “original prices” advertised on their Groupon. While the actual number of businesses that quoted us prices less than their advertised value even exceeded 43 businesses, we allowed for a 10% price change leeway, in the event that they changed the price of their good or service since using Groupon.
The fact that 43/100 businesses inflated their prices when using Groupon to advertise their products, raises an important issue for consumers buying daily deals, as well as for the daily deal sites that are continually striving to provide as much transparency as possible to its consumers. For consumers buying daily deals our study shows that there are significant chances that the discount consumers believe they are getting and value they are receiving, are often overstated when the businesses do not provide published prices on the web. On the other hand, for the daily deal sites featuring a wide array of businesses, our study reveals a major area where deal sites must increase their due diligence in making sure that prices are correctly aligned with the true value that their customers will receive.
Along with these findings a few other interesting findings that came from this study were the following:
Businesses offering the deal for Groupon price, without requiring a Groupon Voucher
A minority of the businesses that inflated their “original price” when advertising on Groupon, offered to sell us the Groupon good/service for the Groupon price, without having to go through the Groupon as a broker for the product. Such a finding may underscore the frustration that a number of merchants expressed to us about the steep commissions Groupon charges them to use their service. By offering users that see their deal on Groupon that same deal, while giving them the option of purchasing it without having to go through Groupon, merchants are able to save money on profit margins lost for an already discounted product.
Businesses selling certain products only if purchased through Groupon
While the price advertised on Groupon as the product’s “original price” is the price businesses claim they would charge if their product was bought without using a Groupon, there was a minority of businesses that would not even sell a certain product they advertised on Groupon unless bought as a daily deal. For example, one such business was a gym that offered a Groupon for a certain number of Pilates classes, and they pegged a “value” that the class has without getting the Groupon discount. However, when we requested a quote from this business, we were told that only Groupon subscribers can buy that type of plan, and if you did not go through Groupon you would have to purchase a totally different type of gym membership.
Such a finding may reveal the fact that as businesses are squeezed down on profit margins when offering Groupons, they may decide to create a product that never existed before, and price it however they wish, potentially creating an artificial value that does not represent the product’s true worth.
Here’s a list of the 100 businesses we contacted, and the prices we received from each one compared to their Groupon advertised values:
|
Name of Business offering Deal |
Deal Offered
|
“Original Value” stated on Groupon |
Original Value quoted when calling business |
|
Dr. Wil Schweigert |
$29 for Massage and Chiropractic Package ($304 Value) |
304 |
29 |
|
Sunkissed Spa |
Bikini Wax, French Bikini Wax, Back Wax, or Full Leg Wax (Up to 57% Off) |
45 |
45 |
|
Baileys Pet Care |
Two, Four, or Seven Nights of Dog Boarding or 3, 6, or 12 Home Pet-Sitting Visits (Up to 68% Off) |
216 |
168 |
|
DeJon Vineyards |
$19 for two wine tastings for four (a $40 value) |
40 |
40 |
|
Coastal Foot Center |
$199 for laser nail-fungus removal on 5 toes (an $800 value) |
800 |
400 |
|
Oak Creek Vineyards |
$32 for a wine tasting for four with four wines per person and four complimentary wine glasses (a $68 value) |
68 |
43 |
|
Skin Religion at Jo Paris Salon & Spa – Scottsdale |
$59 for one stimulating microcurrent collagen facial (a $140 value) |
140 |
140 |
|
Laser Center of Maryland |
$50 for Microdermabrasion with Skincare Analysis at the Laser Center of Maryland in Severna Park ($125 Value) |
125 |
125 |
|
Scuba Hut of Maryland |
For $45, you get admission for two to a Try Scuba class (a $160 value). |
160 |
50 |
|
Duct MD |
$49 for cleaning of up to 10 air ducts (a $199 value) |
199 |
199 |
|
MD Skin Effects |
$59 for one chemical peel and one dermaplaning session (a $225 value) |
225 |
225 |
|
Revive MD |
For $150, you get three laser-hair-removal sessions on the upper lip or sideburns (a $297 value) |
297 |
297 |
|
Dr. Gail Humble MD |
for $99, you get a sclerotherapy leg-vein-removal treatment from Dr. Gail Humble MD in Redondo Beach (a $350 value) |
350 |
350 |
|
Cosmetic Surgery Center of Maryland |
$129 for 20 units of Botox (a $260 value) |
260 |
260 |
|
ClarityMD |
for $49, you get a vibraderm facial (a $125 value) |
125 |
125 |
|
MD Custom Rx |
For $35, you get three 30-minute far-infrared-sauna sessions (a $75 value) |
75 |
75 |
|
Michael Law, M.D. |
For $67, you get one month of unlimited LED/Photomodulation sessions (a $400 value). |
400 |
400 |
|
Pure MD Dayton |
for $78, you get 12 units of Botox at PureMD Dayton in Beavercreek (a $156 value) |
156 |
165 |
|
Tire MD |
$29 for three synthetic-blend oil changes (a $90 value) and three tire rotations (a $60 value; a $150 total value) |
150 |
150 |
|
James Marshall MD |
For $999, you get one Aqualipo liposuction procedure for the chin, upper abdomen, or lower abdomen (a $3,500 value) |
3500 |
3000 |
|
The Pilates Studio at College Park Athletic Club |
for $65, you get 10 Pilates mat classes at The Pilates Studio at College Park Athletic Club in Bannockburn (a $150 value) |
150 |
150 |
|
Pet Paradise |
For $24, you get two days of dog or cat daycare (a $48 value) |
48 |
48 |
|
The Beauty Spot |
for $49, you get a 30-minute massage, flash facial, and basic pedicure at The Beauty Spot in College Park (a $135 total value) |
135 |
135 |
|
The Maryland School of Sailing & Seamanship |
$99 for a one-day introduction to sailing class for one (a $250 value) |
250 |
190 |
|
Central Alabama Fowl Preserve |
$75 for skeet shooting for four (a $348 value) |
348 |
200 |
|
Arizona Powerchutes |
for $125, you get a powered parachute lesson from Arizona Powerchutes in Cave Creek (a $289 value) |
289 |
289 |
|
Skydive Jersey |
for $114, you get a tandem jump at Skydive Jersey, located in Pittstown (a $229 value) |
229 |
195 |
|
Diet Montana |
$65 for One-Week Weight-Loss Program ($258 Value) |
258 |
258 |
|
Montana Creek Campground |
For $14, you get one night of camping in a standard campsite without electric hookups (a $28 value) |
28 |
28 |
|
Towncar Express San Francisco |
$45 for a one-way Lincoln Town Car ride for up to four to San Francisco International Airport (a $100 value) |
100 |
50 |
|
Tropicalaser |
$99 for Three Laser Hair-Removal Treatments at Tropicalaser ($600 Value) |
600 |
600 |
|
Cupcake.Love.Miami |
$25 for two dozen large custom cupcakes (a $60 value) |
60 |
60 |
|
Miami BeachSports |
$89 for One-Hour Jet-Ski Rental with Two All-Day Chaise-Lounge Rentals ($210 Value) |
210 |
160 |
|
Slim Trim Spa |
$159 for six ultrasonic cavitation weight-loss treatments (a $1200 value) |
1200 |
400 |
|
Facial Spa and Body |
For $49, you get a one-hour anti-aging facial (a $145 value) |
145 |
95 |
|
Salon Sixta |
$15 for a Shellac manicure (a $35 value) |
35 |
25 |
|
Sound Eye & Laser |
$2,499 for LASIK Eye Surgery for Both Eyes ($4,998 Value) |
4998 |
3998 |
|
Dojo 3 |
$24 for 20 Zumba Classes at Dojo 3 ($190 Value) in Renton |
190 |
180 |
|
Northwest River Guides |
$24 a 90-Minute Willamette Falls Kayak Tour ($49 Value) |
49 |
49 |
|
East Coast Aero Club |
$69 for an Introductory Helicopter-Flying Lesson from East Coast Aero Club ($225 Value) |
225 |
279 |
|
Pure Aesthetics Miami |
$279 for One Syringe of Restylane or Juvéderm ($750 Value) |
750 |
600 |
|
Medical Solutions |
$179 for one Fraxel-laser facial treatment (a $500 value) |
500 |
450 |
|
Body Sculpting of the Palm Beaches |
$149 for Three Lipo-Light Treatments ($525 Value) |
525 |
525 |
|
Edge Hoboken |
For $29, you get a 5-class pass (a $125 value) |
129 |
129 |
|
Joli Visage Permanent Cosmetics |
$99 for eyeliner on the lower eyelids (a $300 value) |
300 |
300 |
|
Overtime Sports |
$49 for youth baseball camp, August 13–16 (a $185 value) |
185 |
185 |
|
Mix ‘em Up Bartending School |
$59 for a 4-hour Quick Mixx course for two (a $178 value) |
178 |
89 |
|
Baldwin Vineyards |
$12 for a wine tasting for four and four souvenir glasses (a $28 value) |
28 |
28 |
|
Ganesha Center |
$20 for two meditation, yoga, or well-being classes (a $60 value) |
60 |
40 |
|
Right Dental Group |
for $35, you get a dental package at Right Dental Group (a $300 value) |
300 |
190 |
|
Vegas Auto Customs |
$49 for window tinting for three windows (up to a $125 value) |
125 |
79.99 |
|
Michigan Advanced Aesthetics |
for $30, you get a rejuvenating facial (an $85 value) |
85 |
85 |
|
LaVida Massage |
$35 for a 60-Minute Deep Tissue Massage Session or Facial at LaVida Massage. Choose from eight locations. |
79.95 |
39.95 |
|
Michigan Hair & Skin Center |
$79 for three 60-minute Fit body-wrap sessions (a $180 value) |
180 |
180 |
|
West Michigan Commercial Cleaning LLC |
For $74, you get two two-hour home-cleaning sessions (a $160 value). |
160 |
160 |
|
Acupuncture Healthcare Associates of Michigan |
$39 for a One-Hour Acupuncture Session ($89 Value) |
89 |
89 |
|
Michigan Institute of Medicine |
For $89, you get 20 vitamin B12 injections (a $1,000 value). |
1000 |
600 |
|
A Clear View Richmond |
$58 for cleaning of 15 windows (a $120 value) |
120 |
89 |
|
Wow! Window Cleaning |
For $89, you get interior and exterior window washing on a one-story house (up to a $250 value). |
250 |
100 |
|
Corsair Sport Fishing |
$99 for a Five-Hour Deep-Sea Fishing Trip ($249 Value) |
249 |
249 |
|
Tribeca Medaesthetics |
$45 for one tattoo-removal treatment for an area up to 3″x3.5″ (a $150 value) |
150 |
150 |
|
Santagto Photography |
$59 for a four-hour workshop with photo safari for one person (a $250 value) |
250 |
79.99 |
|
La Piel Medi-Spa |
$89 for one photofacial treatment (a $223.81 value) |
223.81 |
223.81 |
|
Brilliant Hair Studio |
$18 for one shampoo, cut, and style (a $36 value) |
38 |
30 |
|
New Mexico Quality Air |
$59 for Air-duct Cleaning for a Whole House with Dryer-Vent Cleaning or a Checkup for One Furnace, AC System, or Swamp Cooler ($159 Value) |
159 |
69 |
|
Salon Shear Obsession |
$22 for a haircut, blow-dry, and style (a $45 value) |
45 |
45 |
|
Chamisa Hills Family & Cosmetic Dentistry |
$35 for dental exam, cleaning, and x-ray (a $310 total value) |
310 |
310 |
|
Heaven’s Best Carpet Cleaning |
$49 for Carpet Cleaning in Two Rooms Up to 250 Square Feet Each ($120 Value) |
120 |
89 |
|
Apple Family Care |
$129 for Six Laser Hair Removal Treatments for a Small Area ($600 Value) |
600 |
129 |
|
Fox Valley Dental |
$39 for a Dental-Exam Package ($342 Value) |
342 |
340 |
|
Appleton Lawn Care Services |
For $70, you get one-half acre of core aeration (a $140 value) |
140 |
124 |
|
Fox Cities Party Rental |
$8 for 20-Pound-Propane-Tank Refill ($16 Value) |
16 |
16 |
|
Big Bay Brewing |
$25 for a tasting package for two (a $50 value) |
50 |
30 |
|
Modern Touch Dentistry |
$49 for a Dental Exam, Cleaning, and X-Rays ($197 Value) |
197 |
154 |
|
Zephyr Clean Air |
$39 for an air-duct cleaning winter special (a $250 value) |
250 |
250 |
|
Zephyr Clean Air |
Cleaning of up to 10 air-supply vents (a $200 value) |
200 |
200 |
|
Sun City Tanning |
$19 for one custom airbrush tan (a $40 value) |
40 |
40 |
|
Oakbay Chiropractic |
$49 for Chiropractic Consultation and Massage ($200 Value) |
200 |
170 |
|
Studio 27 |
$169 for permanent eyeliner on upper and lower eyelids (a $400 value) |
400 |
395 |
|
Hartford Dental Group |
For $179, you get Zoom! in-office teeth whitening (a $499 value). |
499 |
349 |
|
Sun-Sation HD Indoor Golf – Hartford |
$35 for two hours of play in two golf simulators for up to four (an $80 value) |
80 |
40 |
|
Los Gatos Dental Center |
$2,499 for a Full Invisalign Orthodontic Treatment ($6,800 Value) |
6800 |
6800 |
|
It’s a Great Day for Dancing |
Two private ballroom-dance lessons (a $70 value)One group practice party (a $10 value) |
70 |
65 |
|
Cory Rose Painting |
$129 for painting of two rooms (a $299 value) |
299 |
300 |
|
GrowinGreen |
For $75, you get lawn aeration and seeding for up to 3,000 square feet (up to a $150 value) |
150 |
150 |
|
Studio 17 Salon & Spa |
$55 for three OPI no-chip manicures (a $120 value) |
120 |
90 |
|
Sleepy Hollow Acupuncture, LLC |
$55 for three acupuncture treatments (up to a $210 value) |
210 |
130 |
|
Preeti’s Organic Spa |
$42 for one 60-minute anti-aging facial (an $85 value) |
85 |
85 |
|
Arthur Murray Dance Studio |
(one private and two group lessons, a $117 total value) |
117 |
117 |
|
Cala Hills Dental |
$59 for a 60-minute dental package (a $450 total value) |
450 |
252 |
|
Paddock Park Animal Care Center |
$35 for a pet vaccination package (a $76.88 total value) |
76.88 |
76.88 |
|
Nature’s Way Organic Salon & Spa |
$29 for one 60-minute Swedish or deep-tissue massage (a $60 value) |
60 |
60 |
|
Manatee Tour and Dive |
$10 for a manatee dive and tour for a child aged 12 or younger (a $24.50 value) |
24.5 |
24.5 |
|
Zoom Ziplines |
$79 for a zipline experience for two (a $159.98 value) |
159.98 |
159.98 |
|
Albany Scuba |
$25 for a two-hour Discover Scuba class (a $50 value) |
$50 |
$25 |
|
University Chiropractic |
$39 for One-Hour Hot-Rock Massage ($80 Value) |
80 |
80 |
|
Heavens Best Carpet Cleaning |
$49 for Carpet Cleaning in Two Rooms ($120 Value) |
120 |
89 |
|
Fox Valley Dental |
$39 for Dental Package with New-Patient Exam, Teeth Cleaning, and X-rays ($342 Value) |
$342 |
342 |
|
Climate Heating and Air Conditioning Services |
$44 for Air-Conditioning Inspection and Tune-Up ($89 Value) |
89 |
89 |
|
|
|
|
|
