Groupon Best Practices In Restaurant Marketing

A couple of years ago, a new word was entered our lives: Groupon. This great organization came seemingly from nowhere and created an entire new industry. Thousands of coupon junkies are now glued to their computers waiting for the next daily deal to show up that they can share with their friends. Groupon is now arguably the fastest growing company ever promising to reach the $1 billion in sales mark within two years of its history.

Seth Godin, an marketing philosopher and the author of many great books on business, says that if other people are copying you, you have done something remarkable. By this standard, Groupon is an outstandingly successful corporation that has over 200 copycats in the United States alone and over 500 worldwide.

Andrew Mason, the founder of Groupon, has produced a very profitable business model. Groupon sure does know how to earn money for themselves.

Now let's see, does it or does it not make sense for your restaurant to participate in the "daily deals" campaigns?

Let's look into how Groupon-style campaigns work.

You offer a number of gift certificates redeemable at your restaurant at a considerable discount (usually around 50%). The offer becomes valid only if the target number of certificates sold has been reached. The dollars your campaign generates is then shared between you and the vendor (Groupon or one of their competitors).

An offer like this is designed to bring in a lot of first-time guests who have never heard of and have never visited your restaurant before. Such a campaign can virtually put your restaurant on the map.

As it sometimes happens, the positives come with quite a few negatives.

This type of heavy couponing is going to bring in price-conscious customers. Many restaurants who have tried the Groupon style of marketing report that the guests who show up with a coupon in their hand tend not to buy more than what the coupon offers. Many don't bother to read the terms and attempt to combine the coupon with other promotions or discounts you may have going on that day.

Several restaurant owners commented that these customers tend to not tip a lot or not tip at all and are on a lookout for a "gotcha" even when you offer the same food and level of service as you normally do. What's worse, not that many of these people visit your restaurant again.

When you plan a marketing campaign around a daily deal, you need to be prepared. Yes it's nice to have a lot of new guests to come in and discover your restaurant for the first time. You, however, must make sure have a plan about how to generate profits and how to get these people to return after their first visit.

Train your employees on how to work with coupon holders. Add first-time guests to join your newsletter, VIP club, birthday club or other type of customer loyalty program you may have set up. Instruct your waiters how to take guests' contact information table-side. Consider some rules to your POS system to automatically include the tip into the check.

Offer Groupon deals only on days and hours when your restaurant is slow and 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 value from Groupon, you are almost guaranteed to lose money on this marketing campaign, even if some of the coupons don't get claimed.

Keep in mind: Each coupon customer that visits your restaurant puts you further in the red unless you do something to drive more add-on and repeat sales.