Is Your Restaurant Business Strong Enough To Survive Groupon Couponing?

Copyright (c) 2011 Baz Rothwell

The rapid rise of Groupon has been made possible by two things, the acceptance of the programme by restaurants and public demand. Obviously both are essential for this type of programme to be successful. Restaurant coupon marketing on this scale has not been seen before and the jury is out on whether either can survive.

The programme is based on the premise of heavily discounting a product or service, in order to guarantee a specific minimum number of buyers. Heavily discounting by anything up to 90%.

While the ideal business to use this kind of high discount promotion should have close to a 100% gross margin, the majority of businesses are going to be using it as a loss leader.

The question is, used properly, as a promotional tool, does it have a serious role to play in club marketing?

Consider the following: If you make an offer of a 50% discount, aren't you de-valueing your service. Can you bear a 50% discount, given that this comes straight off your bottom line plus the promotors cut which could be another 30-50% of the deal price. The vast majority of the customers who utilise these offers, do so only because of the deep discounts offered. How likely are they to become repeat customers?

Obviously your business circumstances need to be taken into consideration.

If you are a high end destination restaurant, there are risks involved in discounting 60% or 70%. You risk alienating your current clientelle and are in danger of your regulars thinking they are not valued. If I was a regular, paying top dollar for your services and then learnt you had given vouchers for 70% off to others, wouldn't I be pissed!

You bet I would, especially if I hadn't been offered any reward for my loyalty.

Alternatively, if you are a moderately priced venue, offering a big discount to fill spare capacity on quiet nights'. Perhaps with the idea of creating - for example - a 'Monday Club Membership', you may have more success. This type of offer is something you would be much better off making to your Twitter and Facebook communities, though. You would also be able to offer a much more realistic discount or special offer, that will not de-value your business and will be a more genuine restaurant promotion.

If you do decide to take up a promotion with a group buying site, I would suggest you also put the offer out to your Twitter and Facebook community as well. Offer your own group a seperate private coupon, so that you can compare the return on investment from both sources. This will give you an indication of the true value of the group buying site.

If you do decide to take up the services of a group buying site, then provide excellent service. These customers will talk more than most about their experiences, so you should work on getting great word of mouth recommendations. Also get them to follow you on twitter and join your Facebook fan page and follow them back. Remember all of their friends will also see the connection to you and your establishment.

Many of these group buying sites exist, but already the marketplace is changing. Some have closed down while others have been acquired by the larger sites. If you are interested in checking them out, here is a shortlist of sites for you. Groupon, LivingSocial, SocialBuy, Wahanda, Groupola, (UK & Europe only) Wowcher (UK only)

As a final comment I note that Facebook has entered the market with Facebook deals, a mobile service launched in the UK and Europe. This could prove to be a 'Battle Royal' and I'm sure we will hear much more in the coming weeks and months.

In the meanwhile I would love to hear your comments and views, both from customers and from restaurants. Let's make this a lively discussion. Just post your comments below, or on my blog.


------

Baz Rothwell is a restaurant marketing specialist with over 40 years experience in the leisure industry. He has compiled a free 5 part e-course to help you get started with your Restaurant Marketing.Get it free by going to http://bit.ly/dSra0k right now or visit http://restaurantmarketingguy.com for more great articles and tips.