Deal or No Deal? Online Deals, Retailer Heterogeneity, and Brand Evaluations in a Competitive Environment

Daily deals platforms have emerged as an integral part of the marketing mix for retailers and have enjoyed a wide acceptance among consumers. However, there is considerable ambiguity about the effects of deals on brand evaluations, in particular, the effects on preconsumption brand evaluations. This ambiguity can influence the decisions by retailers to join daily deals platforms, which operate as double-sided networked markets. We perform a series of laboratory experiments to test the effect of offering a deal in these platforms on consumers’ preconsumption brand evaluations. Our research shows that brand evaluations are contingent on retailer characteristics (price segment and age), customarily reported deal-performance statistics (number of views and purchases of the focal deal), and competitive deal intensity. Furthermore, the paper finds that the effect of daily deals on brand evaluation differs substantially from that associated with regular print coupons, which operate without the benefits of a platform-based model. Finally, local competition from deals in the platform is shown to have a significant negative spillover effect on neighboring retailers who do not offer deals. Our work thus informs retailers considering joining deals platforms about potential costs associated with such a decision, while also providing insights for platform owners on how they may help mitigate some of these losses in brand value for members of their ecosystem. Our research thus provides for a fuller and more nuanced evaluation of daily deals’ effects on brand evaluations.