From:
What is missing in the typical narrative about Groupon – the one promoted by the company – is the “counterfactualâ€. The counterfactual is a powerful concept embedded in statistical theory. In order to evaluate the data in front of us, we must imagine an alternative world (the counterfactual) in which we allow the data to present themselves differently. To understand how medicine X might affect you, you can't just measure what happened after you took medicine X; you must also consider what might have happened if you took medicine Y and/or nothing at all.
So, instead of just thinking about the new customers brought in by Groupon, we must also consider the world without Groupon. In the world without Groupon, the regulars pay $100 for their meals, and the new customers pay $0 or some other amount (if Giorgio’s has other ways to attract them). This allows us to realize that the insertion of Groupon into that world would lower the intake from regulars while simultaneously raising the intake from new customers. For the merchant, whether Groupon is a net benefit depends on the balance between those two numbers.
This is related to the concept of opportunity cost in economics. When evaluating the value of an investment, we can’t just tally up the returns of said investment; we have to compare those returns to the returns of doing something else such as keeping the money in the bank.
That is interesting..... My two cents is this with out getting into the kinda hard to follow just by reading it math...
1. Groupon is set up by a certain number of people and a certain number of time.... My understanding is that it is like buying a group rate....
A. The hope is that this big group of people will try something they normally wouldn't because of the savings and the group thing ... So you get customers you wouldn't normally get...
B. Might lose some money on Regulars but Regulars who like the place have a time and place they go and might not like this idea
c. With the company deciding the date they can pick a time when business is slow or when having a bunch of people come in helps them out...
It is important to understand that with any coupon you save money. But on each unit or each meal this is a certain amount of profit made and with a coupon that profit amount goes down but it is still a profit.... What the hope is that the smaller amount of profit (this may not hold true in many things with groupon) with more buyers makes the total profit higher and even if it doesn't that in the long run the new customers will by more... I think Restaurants are perfect for this often cause people don't want to try a new kind of food or a new place they love the place that they go but for cheap they will try a new place... If the food is on buy old place hello new place.....