We’ve seen many restaurants jump on the “coupon bandwagon” these last few months in an effort to stimulate their business through this rough economy. It has become a feeding frenzy for “Social Coupon” sites like Groupon and LivingSocial that offer customers deep (and we mean DEEP, up to 60-70%) discounts while the tab is being picked up by the restaurant owners. They are often blinded by the vast database of potential customers offered by these companies. But, as the saying goes, “anything that sounds too good to be true, probably is.”
The lesson here is clear. Think before you act on a sleek sales spiel from a social discounter. Check out the cartoon below. This seems to be happening too often.
It is no secret that running a discount program like Groupon will often create a (short term) increase in customer volume. But if you consider you’ll likely need at least 200% guest traffic to break even on a 50% discount, you might reconsider this as a marketing option. Actually, a 50% discount means that your business keeps only 50% of the remaining dollars because the other half goes to the discount program for ‘their services’.
When you couple these programs with the unforeseen rise in the cost of food the result is too often a losing scenario for independent restaurant owners who are swallowing the cost. To quote Jay Goltz, “Instead of writing a check for an ad, you are choosing to lose money on sales”. He stresses the importance of doing the math.
These sites certainly appeal to their numerous followers looking to get a deal in this time of heightened sensitivity to prices; but are independent restaurants falling victim to this feeding frenzy created by these social coupon sites?
Are these social network coupon companies using their followers to bait unsuspecting small businesses into a marketing program that sucks the life out of them?
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This means that it is critical for restaurant owners to do the math before inking the deal with group buying sites. But how did this form of promotion gain such momentum?
Great point! It actually goes even deeper than that. Apparently, this form of promotion gained such momentum mostly thanks to media hype. Groupon and other social buying sites got a ton of funding from VCs and spent great amounts of money on advertising (try to go to just about any Facebook page and you’ll see a Groupon and/or LivingSocial ad on the sidebar). Anyhow, the usual is true… if you see it everywhere and hear it everywhere… it must be good. Also, if everyone else is doing it… it must be good. Right? Remember the sub-prime crisis? If everyone is buying houses they could never afford it must be Ok… right?
Anyhow, there is a ton of great examples out there that the social buying deals are simply not a good idea for independent restaurant anyway you slice it (whether you do the math or not, makes no difference). Take a look at the following story and all will be clear.
Simply put, the answer is yes, they are.
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