One of the hottest topics among restaurant owners in recent years has been whether Groupon and other daily deal offers were a good form of restaurant marketing. The economic downturn left restaurants searching for ways to fill their empty tables. Groupon stormed onto the scene with a great deal of media buzz and left restaurant owners considering if these offers were the solution they were looking for. The people pushing these plans had a sales pitch that made sense. The ability to reach customers and turn them into frequent guests seemed to be worth the risk.
Enough time has passed since the Groupon for restaurants trend began for research to catch up with the hype. As researchers began to study the effects of these deals, the experiences of many restaurant owners were validated. One of the most compelling of these studies was titled “Customer Response to Restaurant Daily Deals,” by Sheryl E. Kimes and Utpal M. Dholakia. Their findings finally quantified the statistics that restaurant owners who were unhappy with their Groupon results had come to believe. I highly recommend any owner considering offering a restaurant Groupon download this report from the link above.
Here are three key findings to consider before making Groupon part of your restaurant marketing plan:
1) 35.9% of restaurant owners would offer a Groupon again (pg. 5). This is a shockingly low return rate. Only 43.6% said they profited from their restaurant’s Groupon experience. Over half felt they lost money and nearly two-thirds would not repeat this restaurant marketing effort. These numbers alone are very telling about the experience restaurant owners had with Groupon.
2) 44% of restaurant Groupon users were already “frequent guest” (pg. 14). Another 34% were infrequent guests. That means that only 22% of restaurant Groupon users were first time guests at the restaurant. The value Groupon sells is exposure to new guests, but the statistics paint a very different picture.
3) Employee satisfaction was the key to Groupon success (pg. 7). The support of your staff for this type of promotion was cited as the single most important factor in the success of this type of promotion. Without a plan to create “buy-in” among your staff, daily deal promotions are doomed from the onset.
This study also addressed several key points that shed light on some of the issues that have been raised about Groupon offers in the past.
Most guests did not feel that they were treated as “second class” (pg. 19). The respondents in this survey overwhelmingly did not feel that they were treated differently than other guests. This is frequently cited as a reason these promotions fail. The research does not find this to be accurate.
Groupon users spend the same as they would without the discount (pg. 19). Another common sales tactic used by those pushing these daily deals is that the guests will spend
more per person because of the discount. This logic is not confirmed in this report.
Groupon users tip based upon the price before discount (pg. 15). This is often used as a way to get staff members excited about a restaurant’s Groupon offering. What is not discussed in the study is the percentage they tip before the discount. Many anecdotal reports agree with the finding, but contend that deal seeking guest often tip at an overall lower percentage than those who dine at full price.
I would highly recommend any restaurant owner considering offering a daily deal promotion read this report in depth. The cost involved with these daily deals is often considerably higher than other types of online restaurant marketing. Groupon is not a restaurant marketing plan. A well thought out restaurant marketing plan will yield results for you business long after this type of deal has expired.