Online group-buying: The effect of deal popularity on consumer purchase intention

Group-buying, in which consumers are granted a discounted price on a purchase offer within a particular period if the offer can achieve a required group size, is a prevalent marketing channel in recent years. Based on the bandwagon effect, a group-buying offer looks more attractive when there are more sign-ups for it. However, when the number of sign-ups is too large, the opposing network externality takes effect because consumers begin to worry that the excessive demand will jeopardize the supplier's ability to maintain quality offering. We captured these two effects by proposing an inverted U-shaped relationship between group-buying deal popularity and consumer purchase intention. Additionally, we identified consumers' risk attitude as a conceptually important boundary condition of this relationship. We conducted two lab experiments to test the hypotheses. The results showed that group-buying deal popularity increased consumer purchase intention before popularity reached a certain point and decreased consumer purchase intention after popularity reached this point. We also found that this inverted U-shaped relationship was more pronounced for risk-averse than risk-taking consumers. Important implications for group-buying intermediaries are discussed.