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?