BUSTED: Groupon And Living Social Caught Inflating Regular Prices To Make Deals Look Better

candy from a baby

Groupon and LivingSocial succeed because consumers perceive them as great deals. But is that true?

Perhaps not.

Thumbtack.com called 10 vendors offering daily deals (five from Groupon and five from LivingSocial) and found eight instances where they were quoted a price over the phone that was cheaper than the advertised regular price being offered.

All five of Groupon’s prices were higher than the same merchant’s price when called, and three of the LivingSocial ones were.

Granted, this is an extremely small sample size, but it is worth noting. Part of the reason people like buying Groupon and LivingSocial so much is the fact that they are saving a huge percentage. By inflating the regular advertised price, the companies can increase the percentage saved.

Some of the most egregious examples from the Thumbtack.com post:

  • On August 24, 2011, Groupon offered carpet cleaning for a 200 sq. ft. room in San Francisco for $45, a discount of 78% from the regular price of $200. The price we were quoted? $160 for 300 sq. ft. of carpet cleaning, or $0.53 per sq. ft. At $0.53 per sq. ft., the cleaning for a 200 sq. ft room would cost $106.
  • On September 19, 2011, Groupon offered two hours of home cleaning services in Phoenix for $49, a discount of 67% from the regular price of $150. The non-discounted price for the cleaning advertised by Groupon? $150. The price we were quoted for two hours of home cleaning? $80.
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