Is Groupon Good For Restaurants?

Categories: News
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There's been a lot of recent talk and articles written about Groupon and its competitors, specifically on whether they really do any favors for the restaurants that sign up for its services. Groupon, for one, charges a 50 percent commission. And though the restaurants do get seats filled, their margins are squeezed.
Some restaurateurs are complaining that the deals aren't financially sustainable and demoralizing. Then there's the question that The Boston Globe asks: "Will people simply start eating their way from deal to deal, never becoming repeat customers?" Slate ponders whether Groupon will eventually "cripple the merchants that rely on it."

NPR's
story focused less on the controversy and more on the economic theory behind Groupon, asking local, noted economist Richard McKenzie, professor at UC Irvine, to chime in on the phenomenon.

"If somebody is willing to scan the newspapers, clip the coupons, go to the store, and redeem the coupon you can be fairly certain that that individual is a price-sensitive individual," he says, which I take to mean that Groupon is really nothing new, just a more popular extension of what us cheapskates have always been doing: taking advantage of deals.

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11 comments
hjames1623
hjames1623

Thanks for sharing. I love groupon! I've used it for everything from restaurants, theme parks, bringing down wholesale lumber prices in Tucson, AZ, shopping, you name it! You just have to make sure to use the deal before it expires. http://www.petermanlumber.com/product.php

hjames1623
hjames1623

Thanks for sharing. I love groupon! I've used it for everything from restaurants, theme parks, bringing down wholesale lumber prices in Tucson, AZ, shopping, you name it! You just have to make sure to use the deal before it expires. http://www.petermanlumber.com/product.php

Rasmus Refer
Rasmus Refer

i would recommend http://www.masterseek.com that provides quick and free access to, among other things, company profiles, contact information, and descriptions of products and services from more than 45 million companies in 75 countries.

Yummo
Yummo

Groupons get the same following as those that go to happy hour, discount or locals nights, byob/no corkage, and free kids meals. I have a strong aversion to coupon clipping myself, but the whole groupon concept feels psychologically more like buying a gift card to me.

My example is that Andrei’s in Irvine had an 50% offer on open table and when I searched the restaurant on yelp, they also had a happy hour listed, weekly yelp happy hour drink offer, and on the tables advertised a half-priced all food on Monday and their daily happy hour specials. I still think in this economy deals need to be offered to attract a consumer that does not have the expendable income to eat out like we used to, but enjoys the social aspect and good food. I always tip on the full amount, always! And I have been known to order a last round of full price drinks, no problem.

I’ve also purchased haircuts, duffy boat rides, and other services very happily. In concept I am sure none of these deals are great for restaurants, salons, spas or other services, but they create an opportunity to expand client base, convert a few people to loyal consumers, and promote their name to thousands via email. Once purchased they can also be shared via facebook too. I have also been very surprised with livingsocial very aggressive advertising on Pandora. Interesting marketing approach to me, but it borders obnoxious for its frequency. Also a lot of these sites are advertising on social networking sites on the side bar.

elvalenz
elvalenz

I found a site where you can get coupons for restaurant called "printapons" they are on all over the news, search online

cogrep
cogrep

I don't think daily deal sites are the right opportunity for all businesses, but I do think it's good for some... and that's in the process of working itself out as the market matures and businesses become smarter. I don't think a blanket statement can be made about it being 'good' or 'bad' as a whole... but the good news is that Groupon is not the only option! Some businesses don't want the volume of customer that Groupon offers and will get on board with a smaller local deal site that will get them 50 new customers instead of 1000. The smaller players also might charge less than the 50% Groupon currently demands. I love a good deal and I'm thrilled that these sites are giving me opportunity to save money!

I started LocalDealSites.com as a guide to daily deal sites like Groupon and LivingSocial and I have over 159 daily deal websites listed! You can filter by city to see which sites have offers in your area. http://www.localdealsites.com/

Kennesaw Mountain Marketing
Kennesaw Mountain Marketing

Too many pundits have over analyzed the deal-of-the-day business. As a marketing consultant with a practice focused on small local merchant's, the business model is ideal for merchants that don't have access to marketing staffs. The value of deal-of-the-day promotions supercedes radio and print advertising for return on investment. With no upfront costs for merchants, which means NO CASH FLOW RISKED, deal-of-the-day promotions are no-brainer decisions for businesses with excess capacity for customers.

The merchants get: A stream (often very large) of new customers; No upfront advertising dollars risked; and often earn profitable customer tranactions from the promotion.

My research shows: About 30% of 1st customer transactions are profitable; About 40% of customer transactions are from current customers (most making incremental purchases they would not have made without the promotion); and about 30% of the promotion's tranactions yield repeat customers.

Businesses need to understand that each deal-of-the-day transaction is an audition. Businesses need to go into deal-of-the-day promotions understanding that these promotions create the opportunity to capture new customers for the long-term, but that gross frofit from the promotion probably WILL NOT help pay next month's rent.

From my perspective as a marketeer that generates incremental revenues for small business clients, deal-of-the-day promotions provide one very solid marketing leg for small business in the 3-leg marketing stool.

JB
JB

As an pedigreed marketer, I know that a Groupon campaign could be profitable for any business owner, as long as intense front-end analysis and planning is done, and sales objectives are established. More or less, virtually every business should know what they can reasonably afford to acquire a customer (or retain a customer, or reactivate a customer) and come out ahead, if not immediately, than over the long-term.

No marketing campaign should be "demoralizing" if intelligent front-end planning and testing are done.

sewa mobil
sewa mobil

Nice article, thanks for the information.

Cunning Stunts
Cunning Stunts

I used to be a food server many many years ago. Therefore, although I love the coupon deals I frequently get through various sources, I hate actually going to the places and using them. Even though the people who coordinated the coupon may like it, I know the waitstaff hates them. And the more upscale the restaurant is, the more uncomfortable I feel. For example dinner for 2 at Mr. Stox for $49.95 coupon.

Servers typically want tables that will spend $200 or more, drink lots of wine instead of the $49.95 customers who order a glass of water with their meal. Also people tend to not tip on the full amount (ie if the bill is $50 and normally would be $100 without the coupon, they tip on the $50). So the waitstaff usually is demoralized by these things and you can always say "Well its better than no business at all", you have to understand that the waitstaff doesn't own the restaurant and doesn't care as much as you would think about that.

On the rare occasion that I do use the coupons, I immediately try to build a positive rapport with the server. I will say something like "I am one of those customers you love with one of these coupons. I used to be a server, and I used to hate this. Don't worry we will try to make it up for the lousy tips you get on some of your coupon customers if you can get through this with us.. Could you make sure that the total before the coupon shows on the receipt so we can easily tip on that amount?"

Sometimes you will get the nicest servers that never make anyone feel uncomfortable and say things like "that coupon is the greatest deal" and they make you feel so welcome. I admire those people so much. They are better people than me. They never show any negativity and you know people have given them crap tips and treated them poorly, yet they still have the greatest attitudes. Unfortunately, these people are one in 100.

Dave Lieberman
Dave Lieberman

I don't like using coupons either, but when I do, I always ask if they can make sure the original amount is called out on the bill.

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