There’s a Boston Innovation article out this week discussing Yipit’s interesting piece entitled, “Groupon S-1 Reveals Business Model Deteriorating in Oldest Markets.

I enjoyed both pieces, but as a software product management professional, I was left feeling non-plussed, yet unsurprised, that in both articles and a couple dozen thoughtful reader comments, virtually nothing was said about the quality of the Groupon product, the user experience, and how these impact the company’s bottom line.

I don’t think I’ll ever understand why so many business analysts observe the symptom (user engagement is down; cost to acquire users is up; average user transaction amount is dropping; etc. etc.), but don’t ask, “what’s up with this user and this product, at the level of individual interaction; what has changed; what’s going on and why isn’t it working the way it seemed to before?”

Why Groupon may be faltering at the individual-user level

I’m a Groupon Boston early adopter. I bought my first Groupon on June 1, 2009, when the number of Boston subscribers was 2% of what it is today. That first summer, I bought a Groupon almost every week. They were awesome, by which I mean excellent prices for interesting places and activities that offered a high-quality product.

Reading the Groupon message board for individual deals, you could see that the feedback on Groupon merchants was very high, on average. Most message board complaints were about users not understanding how the product worked, rather than about the merchant or deal itself.

Fast forward 2 years: I still use Groupon, but I only buy a Groupon every few months now. Anecdotally, I can say my Groupon-using friends’ behavior has changed in similar ways. There are a few, easy-to-describe reasons for our reduced engagement.

What has changed abut Groupon?

1. I bought too many Groupons when I was a new user, and couldn’t use them all before they expired. That caused me to slow my purchasing down.

2. I discovered more recently that Groupon “expiration dates” are not based in reality. Most are “valid” for a year after purchase, but in Massachusetts (and most states), gift certificates are required to be honored much longer, like for 5-10 years. I found this out when I called Groupon to ask for a refund of an expired Groupon that I had not been able to use, due to merchant error. Now that I’m going back and using all my old, “expired,” Groupons, it’s silly to buy so many that I have a glut of them waiting to be used.

3. The trust, if not gone, is less. This experience knocked Groupon’s “trustworthiness score” down several points in my estimation. They spend a lot of engineering time to make sure I get prescient warnings about my soon-to-expire Groupons. I went from thinking that was an excellent, user-friendly and customer-respecting feature, to knowing that it is an intentionally misleading and BS-filled feature.

4. Groupons just aren’t what were! There used to be some pretty amazing merchants on Groupon. These days, it’s an overwhelming clutter of every neighborhood nail salon and sandwich shop, and hotels offering dubious deals that may be found anytime on Hotels.com etc. I liked Groupon much better when it was just one, high-quality daily deal–easy; helping me out in my busy life; less to think about. Now that the quality has cheapened, I really need to check out the merchant to be sure they are reliable. I was willing to pay more for reliably excellent Groupons–and they didn’t need to be super-targeted. I liked the variety! These days, the individual deal message boards are full of complaints about crummy merchants–often in the form of warnings to other users, and sometimes even in the form of incredulity that Groupon would “once again” run a deal with a merchant who so badly mangled a previous deal that previous purchasers have never been able to redeem their original deal.

4. Amount per purchase. Because I now have generally lower confidence in the quality of Groupon merchants, I am not usually willing to buy the more expensive Groupons (>$50). In fact, I’m even hesitant about the $20 Groupons. When purchasing a Groupon for a restaurant, one also now needs to take into account that alcohol is no longer included. Turns out, it has always been illegal for Groupon to include alcohol in their discounts, but for a while, they did it anyway (VC money doesn’t always equal a good product but it does usually mean due diligence; it’s hard to believe they didn’t know they were outside the law on this one). If a merchant seems to have a poor reputation, based on user feedback, I will either skip the deal, or maybe spend ten or fifteen bucks. But why bother paying $50 for a discount on a product that may well be lame when I can spend $50 full price at a lunch spot I already know and like.

5. Upshot: The caché is gone and the romance is over, but we can still hangout…