Q: Should Restaurants Offer Deals Via Sites Like Groupon
A: I have heard so many different things about the online marketing that it is hard to really ignore the positive impact of the marketing, however, it is not known whether or not these companies are really drawing new trial or are being watched by people who are simply looking for discounts on their favorite restaurants or stores.
The sales pitch of ‘incremental value’, meaning that they will give you a customer you never had before and therefore is worth the 30 per cent or so that they take of the discounted sale, makes those meals in particular, and all costs associated with serving them, including the liability, not worthwhile.
Earlier this year an Ontario-based burger company participated in a marketing campaign that had approximately 25,000 purchases. There is little question in my mind that these coupons were sold to 25,000 new customers. I believe that the vast majority of them were sold to existing customers who wanted a cheaper product the next time they went to their favourite burger joint.
If a $10 product is sold at half price – $5 – and the marketing company gets 30 per cent of that, then the restaurant owner is left with $3.50 to cover the food and operating expenses of the restaurant. At best, the sale covers the food cost and nothing more. Unless you are convinced you can sell several bottles of wine and water to the guest, which is usually not the situation when someone comes to dine at a discount, the promotion is not worthwhile.
I have recently read that the coupon programs offered through this type of social marketing actually put so much stress on restaurant resources that they often do not provide adequate service, and while there is a short term buzz while the promotion is on, the total result in the long term may be a loss of business of up to six per cent.
About Doug Fisher:
Doug Fisher is foodservice consultant specializing in franchise development, strategic planning, mergers and corporate sales, business planning and litigation support. He is currently President at FHG International – Foodservice & Franchise Consultant.