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Price Discrimination

It's kind of amazing to think that it hasn't even been a year since I bought my first Groupon. My first voucher cost $9 and was good for $20 worth of Thai food at a great restaurant in Cleveland Heights. One evening I took my girlfriend and my voucher to the restaurant and everything went without a hitch.

(from Groupon on Flickr)

At the beginning, the Groupon model made a lot of sense to me. - it was simply a bunch of people getting together to get a sort of "bulk discount." It's that knowledge that gave me confidence that the deals were legitimate, rather than a big hoax, like most "too good to be true" deals usually are.

both the coupon industry and the retail industry is now facing. I wonder how many people truly understand the original idea behind Groupon, versus those who take for granted that they get really good deals every once in a while for no apparent reason?
In theory, Groupon's business model is "group coupons": If enough people sign up, the deal "tips" into action (because Groupon is so large, almost all deals now tip). In practice, Groupon's original idea—to encourage users to form groups to negotiate with merchants—seems to have disappeared. The notion of user empowerment has likewise vanished amid intense competition for the direct-to-consumer e-mail marketing business.
I'm starting to worry that Groupon is causing a unique type of inflation, where merchants raise prices in order to compensate for the increased amount of business Groupon is driving to them. I don't have good evidence that it's happening, but I'd believe it if someone else does.

Worse, merchants are starting to put restrictions on their Groupons (sometimes within the terms of the deal, sometimes not) that make these vouchers significantly less valuable. A friend of the blog told me about a recent visit she made to a local restaurant. When she tried to cash in her voucher, she was told the deals aren't valid after 9pm. This was nowhere in writing, but the business refused to accept the voucher nevertheless.

Price discrimination is nothing new in the business world. Every Monday I used to eat 40-cent wings and drink very cheap beers at my favorite bar in Cleveland. The bar offered different deals based on the day of the week, but the idea was simple... the deals were best on Monday and Tuesday and got progressively worse throughout the week, until the weekend, when there really weren't any deals. Point is... businesses have been engaging in price discrimination long before Groupon existed, and they were better able to control the terms.

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