Not so long ago, a new word was entered our lives: Groupon. This great organization came seemingly out of nowhere and created an entire new industry. Thousands of coupon junkies are now glued to their computers waiting for the next daily deal to show up that they can share with their friends. Groupon is now arguably the fastest growing company ever promising to reach the $1 billion in sales mark within two years of its history.
Seth Godin, an exceptional marketing thinker and the best-selling author, says that if other people are copying you, you have made something remarkable. By this standard, Groupon is an outstandingly successful business that has over 200 copycats in the United States alone and over 500 worldwide.
Andrew Mason, the founder of Groupon, has created a very profitable business model. Groupon sure does know how to make a profit for themselves.
Now let’s find out, would it make sense to start a Groupon campaign?
Let’s review how “daily deals” campaigns work.
You offer a number of gift certificates redeemable at your restaurant at a substantial discount (usually around 50%). The offer is valid only if the target number of certificates sold has been reached. The dollars your campaign generates is then split between you and the vendor (Groupon or one of their competitors).
An offer like this is designed to bring in a lot of first-time guests who have never heard of and have never visited your restaurant before. Such a campaign can pretty much put your restaurant business on the map.
As it sometimes happens, it’s not all “lollipop and roses”.
This type of heavy couponing is going to bring in price-conscious customers. Many restaurants who have tried the daily-deals style of marketing report that the guests who show up with a coupon in their hand tend not to buy beyond what the coupon offers. Many never read the terms and try to combine the coupon with other promotions or discounts you may have going on that day.
Several restaurant owners commented that these customers tend to not tip a lot or not tip at all and are on a lookout for a “gotcha” even though you offer the same food and level of service as you normally do. What’s worse, few of these guests end up coming again.
When you plan a restaurant marketing campaign around a daily deal, you need to be prepared. Yes it’s nice to have a lot of new guests to come in and discover your restaurant for the first time. You, however, need to ensure have a plan about how to earn cash and how to get these people to return after their first visit.
Train your crew on how to work with coupon holders. Add first-time guests to subscribe to your newsletter, VIP club, birthday club or other type of customer loyalty program you may have available. Instruct your waiters how to collect guests’ contact details table-side. Consider programming your POS system to automatically include the tip into the check.
Offer Groupon deals only on days and hours when your restaurant is slow and only on those items that offer you a high profit contribution margin. Your food cost is probably anywhere from 28 to 36% of the menu price. Given that you only get 25% of the value from Groupon, you are probably going to lose money on this marketing campaign, even if some of the coupons don’t get claimed.
Keep in mind: Each coupon customer walking in door puts you further in the red unless you do something to drive more upsells and repeat sales.