Watch out for the next Groupon or Living Social Deal. Merchants are raising their prices without you knowing it.
Don't get me wrong: I love Daily Deals from Groupon's and Living Social. I would say we probably spend $100 a month on daily deals for various things that we never thought we needed.
Groupon just went public. There are a lot of people questioning whether Groupon's are good for merchants. I question whether Groupons or Daily Deals are good for consumers. One of the consistent problems with Daily Deals from Groupon, Living Social, Amazon Deals, Google and FaceBook is that the merchant raises its prices first and then offers you a ridiculous discount via Groupon, so in the end, you as the consumer don't save much money at all. There have been some high profile SNAFU's regarding these pricing strategies where businesses have increased prices for Groupon customers. The most visibile was the FTD Groupon ahead of Valentine's day 2011. Harvard Business School published a study on this phenomenon recently.
My wife and I suffered from the Groupon price increasing phenomenon with a Living Social for Seattle Limo Taxi today. Living Social advertised $25 for $50 for a car service. Crazy good deal. We bought three since we travel a lot. On their web site, they advertise the lowest rates in Seattle and that a car from Bellevue to the airport is $39.50. Car service from our house generally ranges from $50-60 to the airport. See below picture.
So we get to the airport, take out the Living Social voucher which says multiple vouchers can be used for multiple trips. We give the $50 voucher to the driver who then says there is no change. Based on their web site and having called them prior to booking the Living Social Deal, it should have only been $40 and we should get $10 in change on the voucher for the return trip. We discuss it for a couple of minutes. We then call the Seattle Limo Taxi office. I ask him how much it costs to go from Bellevue to the airport and he says $60. What? Now the price went up from $50 to $60 when we were using a Living Social voucher.
OK, my wife is thoroughly annoyed at this point. We hand over the $50 voucher and give the driver a $5 tip. My wife asks, "Should we call up Living Social to cancel the other two vouchers?" I was in disbelief and said that there must have been some mix up.
So we decided to call up Seattle Limo Taxi to book another car to see what the price should be:
Me: How much for a car from Bellevue to the airport?
Seattle Limo Taxi: How many people?
Me: 4 - 2 adults, 2 kids
Seattle Limo Taxi: $50
Me: Your web site says $40
Seattle Limo Taxi: That's for three people, you have four. $10 extra for another person. Do you want to book it?
Me: No, I am just calling around.
Seattle Taxi Limo: Ok, ok. I can give it to you for $40 as long as you are NOT using a COUPON.
So here's what I understand of their pricing:
$40 on their web site, but no one really pays $40
$50 if you call them
$60 if you use the Living Social Daily Deal
So should I be upset? We did get a car ride which is normally $50-60 in price for $25. Yes, that is a great price.
Regardless, we called Living Social to cancel the other vouchers. You have 5 days from voucher purchase to cancel a deal and get your money back. Living Social apologized for the bad experience and refunded us out money.
But, now that we are Living Social and Seattle Limo Taxi-less, the real question is: can we get a ride from SeaTac airport to Bellevue? Anyone? Bueller?