Commercial catering equipment

Marketing Secrets: To Groupon or not to Groupon?

Groupon coupons for restaurant business About two years ago, a new word was entered out lives: Groupon. This company came seemingly out of nowhere & created an entirely new industry. Thousands of coupon junkies are immediately glued to their computers serving for the next daily deal to show up that they can experience with their friends. Groupon is now arguably the quickest growing company ever encouraging to reach the $1 billion in sales mark within two years of its history. 

Seth Godin, a marketing philosopher & the best-selling author, says that if other people are copying you, you have done something remarkable. By this standard, Groupon is an outstandingly successful company that has over 200 copycats in the United States alone & over 500 worldwide. 

Andrew Mason, the originator of Groupon, has created an extremely successful business model. Groupon sure does understand how to make money for themselves.  The big question is, does it or does it not make sense for your restaurant to participate in the “daily deals” operations? 

Let’s take a look at how “daily deals” campaign work. 

You offer a plenty of gift certificates redeemable at your restaurant at a significant discount (usually around 50%). The offer is valid only if the target number of licenses sold has been reached. The money your campaign generates is then split between you & the vendor (Groupon or one of their competitors). 

An offer like this is meant to bring in a lot of first-time guests who have never more heard of & have never visited your restaurant before. Such a campaign can put your restaurant business on the map.  As it is usually the case, the positives come with quite a few negatives. 

This type of massive couponing is going to bring in price-conscious clients. Many restaurants who have tried the daily-deals style of marketing report that the guests who show up with a coupon in their h& tend not to buy beyond what the coupon offers. Many don’t bother to read the terms & try to combine the coupon with other deals or interests you may have to go on that day. 

Several restaurant partners commented that these guests tend not to tip a lot or not tip at all & are on a lookout for a “gotcha” even though you offer the same food & level of service as you do to non-coupon companies. What’s worse, few of these guests end up coming again. 

When you plan a marketing campaign around a daily deal, you have to be prepared. Yes, it’s nice to have a lot of new guests to come in & discover your restaurant for the first time. You, however, need to make sure you know how to make money & how to bring these people again after their first visit. 

Train your team on how to run with coupon holders. Add first-time guests to your newsletter, VIP club, birthday club or another type of consumer loyalty program you may have in place. Teach your waiters how to capture guests’ contact features table-side. Consider programming your POS system to automatically include the tip into the check. 

Offer Groupon deals only on days & hours when your restaurant is slow & only on the 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 price from Groupon, you are almost guaranteed to lose money on this campaign, even if some of the coupons do not get redeemed. 

Remember: Each customer with coupon walking in door puts you further in the red unless you do something to drive more add-on & repeat sales.