Identifying the benefits and risks associated with flash sale websites and their potential implications for return customers

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2013-05

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Abstract

This research paper is focused on the emergent concept of daily-deal sites such as Groupon and LivingSocial. Flash-sales have become a relevant marketing medium for firms, offering thousands of daily-deals each day. This research aimed to (1) identify the availability of content on sites such as Groupon and LivingSocial relevant to the hospitality industry, (2) examine consumer perceptions, attitudes, and motivations when purchasing a daily-deal voucher, and (3) measure the motivations and justifications business operators employ when choosing whether to offer a flash-sale. Three separate studies were conducted as part of this research. The first component was a content analysis of the daily-deal offerings for randomly selected cities on the Groupon and LivingSocial websites. A detailed measurement rubric based off of six Standard Industrial Classification (SIC) Codes was employed to monitor and classify the frequency of vouchers available for purchase. Upon completion of the content analysis, a consumer survey was administered online to end-users of flash-sale sites. The survey contained inquiries related to factors which influence customers to purchase daily-deal offers, and components which affect the likelihood of revisitation. A structural model was employed to measure predictive relationships related to purchase motivation. The final component of the research relied upon qualitative interviews with businesses which have employed flash-sales and those which have relied upon alternate marketing mediums. Interview questions were derived to measure justification for adoption and avoidance of flash-sales by operators. The content analysis identified an under-representation of hospitality and tourism firms on the flash-sale sites with the exception of restaurants. Findings established tourism providers were likely to target their marketing efforts towards individuals outside their city of operation and would not benefit from offering a deal to locals. Results from the consumer survey highlight customers were highly influenced to purchase based on their attitude towards the product offered, price of the voucher, and proximity of the firm to their residence. Consumers demonstrated the possibility of establishing a long-term relationship with firms encountered via flash-sales, but were perceived as being easily influenced to switch brands based on a high-discount offering from a competing firm. The qualitative interviews demonstrated businesses which have employed flash-sales are weary of the actual likelihood of success and feel as though the deals brought in already established customers. Firms which have not utilized daily-deals indicated a major hesitation towards adoption related to low profit margins per item in their operation, and the percentage split of the sale price between the firm and flash-sale provider. This study is unique as no academically published research currently exists related to the flash-sale concept. Measuring flash-sales in terms of product availability, consumer motivations, and business attitudes provides findings which may provide a foundation for future research studies. Furthermore, findings may prove beneficial for consumers which purchase flash-sales, businesses considering implementation of the medium and sites which provide daily-deals.

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Keywords

Daily-deals, Flash-sales, Groupon, LivingSocial, Consumer behavior, Structural equation modeling

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