Should I use Groupon to attract hundreds of people to my place?
My answer is simple. No, you shouldn't. And the reason is very simple.
It is true that Groupon could bring many customers to your business but the question that you should ask yourself is: Are these the kind of customers that you want?
Not only your profit margin will be minuscule (if any) after all the fees that you must pay to Groupon and all the (big) discounts that you must give to these customers but, by definition, you will bring people who are addicted to bargains. If your hope is to capture these customers so that they will love your place and come back to your restaurant, I have bad news for you: They won't. Instead, they will go to the next restaurant that gives them a new Groupon offer.
If you read my book Restaurant Marketing Strategies or some of the content in this site, you know how much I don't like spending money to attract new customers. Instead, try something different: Spend your marketing budget in your existing customers.
Yes, that's right. Treat your regular customers like kings and queens. Surprise them with something extra that they don't expect. Woo them with impeccable service and excellent food. Give them some free dishes or gift certificates so that they come back another time. Make your best effort to convince them (with facts, no words) that your restaurant is their favorite restaurant in the city.
Not only you will expend less money than trying to bring hundreds of cheap customers to your place, but these customers who you already have in your restaurant will come back and bring their friends and family members with them. They will become your best salesforce because people trust their friends and family members more than any fancy advertising. And, as an added bonus, they will be so happy with your business that they will express their opinions in blogs and forums all over the place.
When somebody is looking to try a new restaurant, they go to the Internet and look for reviews. If yours scores very high in customer satisfaction, this is the best advertisement that you can buy at any price.
Good luck,
Jose L Riesco
As a Groupon user, I have to disagree with you. My husband and I use Groupons to try new restaurants, we eat out once a week. If not for Groupons and Yelp, we'd probably eat at our three tried and true favorites all the time.
ReplyDeleteBut lately, using Groupons we've added two new spots to our rotation that we would not have known about if not through through this avenue.
You're kinda making looking for a bargain sound like its a bad thing. I don't know of anyone who would RATHER pay full price if given the option.
Looking for a bargain doesn't make us bad tippers or undesirable clients/guests. Restaurateurs: I don't know what Groupon charges as fees, but there are certainly two sides to every story. If you're touting a great product and you don't want to try conventional means, I'll give you a look!
Completely disagree - you obviously have not run a Groupon before. If you did you would understand that only about 80% of Groupons purchased even get used (increasing your margin by 20% on each ticket) and the spreads are very profitable. The email list exposure alone is very valuable. And you should also understand that the consumer who purchases Groupons is not "cheap" and actually often an affluent, savvy customer. I've used Groupon several times and, done the right way, it has boosted my consumer and recurring sales.
ReplyDeleteNot to be rude, but I would like to know what you're selling here - your article is based on absolutely zero factual data (you don't know what Groupon charges). Sometimes getting the word out and with Groupon and then backing it with a superior product or service is one of the smartest strategies out there right now.
To start with, I have to clarify that I am not trying to sell anything. I have many clients who own restaurants and some of them tried Groupon. They lost money. If it works for you, great, but in my experience, it is much better to spend the money in your existing customers than try to bring lots of new people chasing the latest discount.
ReplyDeleteIn any case thank you for the feedback and good luck!
Jose L Riesco
Hey Jose! Groupon is definitely profitable for SOME restaurants. Obviously it won't work for everyone. I suggest using a groupon to offer a deal, that you normally don't offer - such as a romantic evening - with a limo pick-up etc. and dinner included!
ReplyDeleteWith that said, this only would work for a sit-down restaurant with a bit nicer food!
Now order up restaurants, could try something else, but the key is adding value, so that when they use their groupon at your restaurant they have an AWESOME experience and can't help but come back for more!
If you are confident you can deliver an unbelievable experience and understand marketing, you aren't afraid to even offer free meals, because they will come back plenty of times and pay for more of your food, because you are being nice to them!
Restaurants need to build communities, and their customers need to love the way they are treated, which is often more important to them than the food.
Take nordstrom for example! They have THE best customer service in their industry. They offer the same clothes as everyone else - but their service is what gets people coming back!
Thanks for the article! It opened my mind up on the topic a bit more!
Travis Chapman
We ran Groupon for our restaurant from October 2010 to April 2011. Our restaurant is quite popular and many of our own customers bought the Groupon when we offered it. Our deal was $15 for $30. The restaurant gets $7.5 for each Groupon sold and Groupon keeps $7.5. We split the credit card fee which is around 3% so as you can see, the most any restaurant can recoup is barely the food cost. We liked our Groupon run as it did bring in new customers but it also brings in some pretty undesirable customers - who don't tip (actually they would eat up to $25 and told our staff that the left-over $5 from the Groupon is their tips!). Groupon needs to do a better job at educating Grouponers. There were people who did not read that the deal is only for dine-in - tried to order take-outs, or get upset when we cannot serve them while the restaurant is closed (and went online ranting about it). Since our current customers bought the Groupons, so our redemption rate is high. Out of 1,200 that we sold, only 82 not redeemed. A few tried to redeem after the expiration date. What we did is to only take $15 off the bill so at least they don't lose their $15. I know we did not have to do it but it does not hurt us. I would only recommend Groupons to restaurants that are doing well, have strong cash flow and do Groupon just to get more exposure. For restaurants that are already struggling; Groupon can put them out of business as the revenue from Groupon comes in like this: 1/3 two weeks after the deal is announced; 1/3 6 weeks after the deal is announced and the last 1/3 is 10 weeks after it was announced. The first few days and the last few days of Groupon were crazy. Discount can account for 1/3 of total revenue. Example: our sale was $3500 - with discount of $1300!
ReplyDeleteNow that Groupon is over for us, we would never do it again. One time is enough and we got what we needed out of it (137 new customers who are now in our Loyalty Reward database).
This comment is directed to Ms Tran,
ReplyDeleteI don't know much about Groupon and have never experienced the process but my comments is about the process of getting new customers that are loyal to your restaurant is the objective, right...In your case 137 new clients that signed up to your loyalty program...to determine the value of these new clients you need to follow Jose's restaurant ebook to find out the life time value of these customers.
This sounds like it was marketing strategy that worked...
Next the comments about Groupon creating low margins that tightens the cash flow...for this I like Travis's comments about offering additional value to your menu item. Travis adds that it is a romantic evening out with limo service, etc...Your not going out for a Hamburger and Fries. This needs a bit of thinking outside the box as well...Plus the process needs a way to get the personal information of each Groupon participant.