CASE STuDy: To Savor or to Groupon? Assume a variable cost of $10 per table and

Question

CASE STuDy: To Savor or to Groupon?

Assume a variable cost of $10 per table and an average spending of $60 per table. With the daily deal ($60 for
$30 coupon), Groupon provides Mr. Chang with a revenue of $15 per table. The analysis provided in the New York Times blog indicates that Mr. Chang makes money ($5 per table) through the daily deal (rather than incurring advertising expense). Do you think the analysis has included all aspects that need to be considered? Should Mr. Chang go ahead with the daily deal given that he can advertise while making a little bit of money per coupon??

Explanation / Answer

To Savor or to Groupon?

In the given case in my opinion the analysis does not cover all aspects of the cost. The given case covers variable cost & average spending cost per table. The important aspect of opportunity cost is ignored totally. Mr. Chang makes money (&5 per table) through daily deals. These daily deal customers has to pay full cost as displacement customers. because here the cost for all aspects to be covered and the cost should paid by the daily deal (displacement) customers only.

Here Groupon have a trend of earlier reservation ( $60 for $30 coupon with a revenue of $15 per table) than the daily trend customers( With revenue of $5 per table). Hence it is advisable for Mr. Chang can go for some other better deals rather than daily deal option ( rather than incurring advertising expense).

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