Group Deals: An Insight into Why We Purchase

The group coupon.  The everyday reminder about what we could be doing – and doing at a discount of 50% to 90%.  Sites such as Groupon, DailyDeal, and DealMobs blast daily emails to inform us, and so many of our deal-hungry peers, that we must buy now in order to take part in the group deal of a lifetime.

But what makes us salivate over these social bargains?  Why do we impulsively purchase these deals?  And how has Groupon become the fastest growing company… ever?

Let’s explore.

One obvious reason is the substantial savings.  Groupon and Groupon-like sites noticeably advertise discounted prices, which average at about 56% of the original price.  By clearly presenting the original item value, the percentage of the discount, and the difference in the sale cost and the actual cost, Groupon informs visitors every which way they are saving money.

This daily-deal-focused advertising may contribute to an unconscious craving by consumers, who, according to a study conducted by University of Westminster researchers, “get the same level of emotional excitement from special offers as they do from sexual arousal.”  This could explain why those of us who have yet to purchase a deal have not yet un-subscribed.

Time is also a major factor of group coupon purchases.  Similar to an ol’ fashioned wild west showdown, where the bad guy gives the good guy an adequate amount of time to show up, Groupon and Groupon-like sites grant us 24 hours to purchase a deal.

A Time Magazine article suggests that being a part of these limited-time purchases compels consumers to “feel special and lucky,” and that if consumers don’t participate in the deal, they often feel remorse and “left out” when the deal expires.  As if that isn’t stressful enough, these sites display a countdown timer and a deal participator cap so that we know exactly when the deal is off.

A third determinant about why we buy is group influence, meaning that daily-deal websites require a group of people to purchase a deal before the coupon is valid.  To promote this, Groupon and other sites flaunt purchase numbers, which tell a consumer the precise count of people that pay for the deal.

As described in Jeffrey Ford’s and Ellwood Ellis’ study on group influence of buyer behavior, products “high in visibility, complexity, and perceived risk, and low in testability” are factors that signify whether products are susceptible to group influence.

Daily-deals meet three our of the four criteria listed by Ford and Ellis.  They are visible to anyone on the Internet, are filled with risk, such that the buyer may not participate in the deal (20% to 30% of coupons are never used), and are low in testability (trying out the product in person) due to purchasing the deals online. These findings lead me to wonder if we purchase a deal for the savings, or we purchase one to conform to a group norm?

Regardless which, if any, reason is correct, it is important for us to become aware of the underlying behaviors we exhibit when interacting with daily-deal websites.  The consistent manner in which deals are presented could have detrimental side effects, such as accumulation of debt, for consumers, especially those who demonstrate the above behaviors.

Identifying the contributing factors listed above is likely to help us make more informed purchases and to assist us with our own self-control.