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Groupon, an online coupon company, was one of many companies that considered an initial public offering (IPO) during what might be a second technology/internet/social media IPO boom in 2011. Some companies chose to postpone their IPOs, while others took advantage of the media attention focussed on technology companies, and in particular, social media firms. Should investors hop on the tech IPO bandwagon, or hold off to better evaluate the long-term prospects of tech companies, and in particular social media companies? Would the valuation of Groupon justify an investment in IPO shares?

The case was researched from secondary sources, using Groupon's IPO filing information, news articles about the IPO and industry research sources, such as IBIS World.

This case is appropriate for an advanced undergraduate or MBA corporate finance or investment elective. Most introductory finance classes do not have the time to cover later chapters in a finance textbook, where information about IPOs is generally found. It could also be used at the end of a core finance course, where the instructor wanted to introduce this topic through a case study of a hard-to-value internet-based company to illustrate the difficulties in setting IPO prices. The case could also be used in an equity analysis class, an entrepreneurial finance class or an investment class, to spur discussion about valuing an internet company and choosing appropriate investments for pension fund investing. This case could also be used in a strategy class, focussing on the five forces question, and eliminating the valuation question.

There is a great deal of literature about IPOs and their long-term performance. An excellent source is Jay R. Ritter's research, http://bear.warrington.ufl.edu/ritter, which has a longer time period and more data than could be contained in this case. IPO puzzles include persistent undervaluing of IPOs; in other words, the offer price is lower than, and sometimes substantially lower than, the first day close price. A second issue is the generally poorer long-run performance of companies after their IPO when compared to similar firms that did not do an IPO.

Marketing Management, Business Strategy and Promotion & Advertising.

Associated degree, undergraduate and graduate students as well as executives from profit-making organizations.

Groupon is the world's largest daily-deal Web site and a pioneer in the group-buying industry. The major feature of the company's business model is that merchants use Groupon as a platform to offer coupons with a discounted price, and the coupon buyers can then redeem these coupons. Groupon has done business in over 50 countries and, by 2012, had over 39.5 million subscribers received its daily news. It had a 59.1 per cent share of the daily-deals market in 2013. Groupon is a publicly listed company on the NASDAQ in the USA, trading under the ticker symbol of “GPRN”.

The students' business knowledge and skills will be sharpened by working through this case, and students will be challenged to identify solutions to the marketing concerns: specifically, how the driving approach of its daily-deal business model enabled the company to adopt a growth strategy that will confront the difficulties of the emergent “golden age” of the daily-deal industry in the twenty-first century. In addition, it will also be of help to the students to take the active roles of thinker, analyst, evaluator, decision-maker and implementer to evaluate the continuing changes in a competitive environment and consider how Groupon can seize available opportunities to predict future performance by comparing data from 2008 and 2012.

Teaching notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.

The purpose of this paper is to investigate social shopping deals and their impacts on review metrics at an online review site, Yelp and to compare the review metrics of the restaurant businesses and the health and wellness businesses to understand how social shopping deals affects them.

This study adopts a multiple regression model to analyse the effect of seven independent variables on the dependent variable, the growth rate of reviews which is a proxy of sales growth. This sample consisted of the review data of 134 merchants which offered social shopping deals at Groupon in 2011. The online review data of these merchants were collected in 2015 to analyse the relationship between the deals and the grow rate of the reviews.

For the restaurant businesses, there is a positive persuasive effect of Groupon customers’ review score on the growth rate of the reviews and consequently on the sale growth. For the health and wellness businesses, there are a positive persuasive effect of the regular customers’ review score on the growth rate of the reviews and a negative awareness effect of the number of Groupon reviews on the growth rate of the reviews. The review data also show that the Groupon customers of the health and wellness businesses are three times more likely to post their reviews than those of the restaurant businesses.

First, while the author limited the study to the seven independent variables, additional variables may exist. These additional variables may also influence the number of reviews, too. Future research needs to identify such variables to build a comprehensive model. Second, future research needs to address other types of businesses, such as education and entertainment, and compare differences between them. Third, while the study focussed on the review score and the number of reviews, a more in-depth analysis of the comments using sentiment analysis and social network analysis may shed additional insights on their review activities.

Despite the potential significance of customers’ reviews about social shopping deals, the critical mass of empirical studies still lacks in this area. The study contributes to the literature of this field by investigating the effect of social shopping deals on the customers’ online reviews. This study provides practical guidance for the improvement of online reviews about social shopping deals.

The purpose of this paper is to analyze the effectiveness of social couponing campaigns for hotels. In particular, the perceived effectiveness related to four specific objectives is explored (acquiring and retaining new customers, building brand awareness, balancing seasonality and stimulating demand among existing customers).

A questionnaire-based survey was conducted that involved 108 hotels, each of which has run at least one social couponing campaign through Groupon in Italy. The importance-performance approach was applied to analyze the data.

Overall, the perceived effectiveness of social couponing for hotels is quite low. Social couponing is useful to increase brand awareness but does not encourage customer behavioral loyalty. Larger hotels can successfully use this marketing tool to balance demand seasonality.

The sample size is limited but includes approximately one-fourth of all Italian hotels that have run social coupon campaigns through Groupon. Only social couponing campaigns run through one daily deal site (Groupon) in one country (Italy) were considered.

Social couponing is not perceived as equally effective for all hotels. This study provides hotel managers with suggestions for deciding whether to allocate a share of their marketing resources to social couponing.

To the authors’ knowledge, this is the first paper to present field data to complement the available theoretical knowledge on social couponing for hotels.

The purpose of this paper is to investigate the relationships between five characteristics of social shoppers’ online reviews (the number of all reviews made by a reviewer, the number of friends of a reviewer, the review score, the number of review words, and images/photos) and the usefulness, funniness, and coolness to viewers for the restaurant businesses and the health and wellness businesses.

A sample of 1,114 online reviews of social shoppers was collected from Yelp.com. A zero-inflated Poisson regression was used due to a high number of zero votes in the dependent variables for usefulness, funniness, and coolness. The regression identified the review characteristics that are strongly associated with the number of usefulness, funniness, and coolness votes made by viewers.

The analysis shows that for the health and wellness businesses, all three dependent variables (usefulness, funniness, and coolness) have the number of reviews, the number of friends, and the number of words as significant independent variables. The results indicate that a reviewer who has more friends and is more experienced in giving reviews is likely to be more influential in generating a perceived value of the online review. The analysis also shows that all three dependent variables of the restaurant businesses have the number of words as a significant independent variable. It is found that there is a negative relationship between the review score and the usefulness votes for both restaurant businesses and health and wellness businesses. The effect of the review score on the coolness votes was not consistent.

This study is the first research attempt in understanding social shoppers’ online reviews and their usefulness, funniness, and coolness to viewers, and therefore makes significant contributions to research and practice. The comparison was made between restaurant businesses and health and wellness businesses. The result indicates that for the health and wellness businesses, managers need to pay attention to social shoppers with a high number of friends and high number of words in a review. It is also noted that it is necessary to analyze review characteristics separately for each business type. However, as is typical in many empirical studies, this study is not without limitations. While the author limited the analysis of social shoppers’ online reviews to the five characteristics, additional variables may influence the number of votes, too. This study is limited to social shoppers’ reviews and the findings may not be generalized to regular customers’ online reviews. Future research should also examine whether similar results can be obtained at other review sites such as TripAdvisor and Zagat.

Despite the potential significance of social shoppers’ online reviews, the critical mass of empirical studies still lacks in this area. For a more comprehensive interpretation of review characteristics, this study develops hypotheses based on the literature review on electronic word of mouth and source credibility models and investigates the effect of the five review characteristics on the viewers’ perceived usefulness, funniness, and coolness. Unlike previous studies focused on a single business type, this study compares the results obtained for restaurant businesses and health and wellness businesses and demonstrates that viewers in each business type respond differently to social shoppers’ online reviews.

Information typically posted on group buying websites includes number of previous buyers, whether a limit has been placed on purchase number, and the time remaining until the deal expires. The purpose of this paper is to demonstrate that these factors may interact such that, under certain circumstances, purchase likelihood is reduced.

The paper first examines actual online data; the authors then follow this with a 2×2×2 experiment in which they demonstrate psychological process.

Providing previous‐buyer‐number information can have a positive effect on a consumer's decision to purchase at an online group buying website (e.g. Groupon). Imposing a purchase limit can increase these positive effects, but providing information on time‐to‐expiration (if it is relatively long) can negate the effects. Both perceived value and anticipated regret are found to be mediating factors.

It is possible that effects may be attenuated as a result of product familiarity.

Retailers should pay particular attention to the timing or pattern of purchases on group buying websites, and provide information accordingly.

This paper is the first to show how the three factors noted previously may interact to reduce purchase intentions.

This paper aims to examine how two non-price cues – consumer rating and number of purchased social coupons (SCs) – serve as risk-relievers for high and low variety-seekers and subsequently impact their purchase decision for SCs offered by unfamiliar brands.

Participants recruited from Amazon Mechanical Turk online panels participated in three scenario-based experiments.

Low (vs high) variety-seekers perceive greater risk and indicate lower likelihood of purchasing SCs offered by unfamiliar brands. Both high and low variety-seekers utilize the two non-priced cues – consumer rating and number of purchased SCs – as risk-relievers sequentially. That is, consumer rating constantly has a substantial impact on purchase likelihood for such SCs, whereas number of purchased SCs is influential only when consumer rating becomes ambiguous. Specifically, low (vs high) variety-seekers have a greater tendency to rely on number of purchased SCs in addition to consumer rating as a risk-reliever.

This paper examines cue utilization process in the SC context and suggests that high and low variety-seekers respond to the two non-price cues differently and sequentially. This provides theoretical insights on consumers’ cue utilization process and managerial insights regarding how managers could strategically handle the cues on SC provider websites. Further, this paper identifies situations where high variety-seekers may not prefer unfamiliar experiences and low variety-seekers may become more likely to embrace unfamiliar experiences.

The purpose of this study is to examine the effect of perceived value on customer loyalty through affective commitment in the online group-buying (OGB) context. This paper addressed the following questions: what are the factors affecting customer loyalty (i.e. revisit intention and buy more intention); and how do referral rewards moderate the impact of affective commitment on customer loyalty?

All data were collected from OGB websites’ members in Taiwan. The total number of respondents to the online survey was 403. The data were analyzed using structural equation modeling (SEM) to test a perceived value–commitment–loyalty model.

This study shows that three proposed antecedents (i.e. OGB scheme value, hedonic value and social value) can trigger customer loyalty through affective commitment. Monetary savings, a variety of merchandise and aspirational products are all critical OGB scheme value components. The results also show that referral reward importance positively moderates the relationship between affective commitment and revisit intention.

The findings have implications for managing people and work tasks in OGB websites. First, understanding the importance of dimensions of value should enable OGB managers to develop more accurate targeting strategies. This study provides guidance on the design of the platform and the OGB scheme, for the effective allocating of marketing resources. Second, a referral reward mechanism can be a critical CRM tool; in addition to the potential to attract new customers, they can also help to retain existing customers. This mechanism is a very effective method to enhance customer stickiness.

The marketing literature generally recognizes the importance of developing and maintaining long-term relationships with customers. This study is the first one to explore the importance of affective commitment in developing and sustaining loyal relationships in the OGB context. Referral rewards are an important moderator variable: affective commitment has a stronger effect on the revisit intention when the referral rewards are high. The findings of this study provide insights into how OGB website developers can create customer commitment and more effectively retain existing customers through the use of referral rewards.