There’s a fascinating report out from John Byers and Georgia Zervas from Boston University and Michael Mitzenmacher from Harvard University.
One of the findings is that a daily deal is associated with lower average Yelp ratings.
One big potential reason is simply that when merchants put out an offer they get swamped with new customers and quality deteriorates–even though the goal of a daily deal is to get new potential customers who will become loyal.
But another reason could just be adverse selection: a well known phenomenon with online reviews is that people who post reviews tend to have either a very positive or very negative view of what they’re posting. There are very few 3-star reviews on Amazon: mostly 1 star and 5 stars. It’s therefore highly possible that a minority of people with bad experiences are crowding out mostly good experiences.
In fact, another survey by LivingSocial found that most merchants were satisfied with their daily deal experience.
(Via Technology Review)
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