Many Independent Restaurant Owners (IROs) have learned the hard way that running a Groupon deal can bring lots of headaches along with the influx of customers. In our previous blog we discussed 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?
By the early 2000’s most restaurant owners realized they needed a website, so that was a “no-brainer” and an easy sell for developers. However, what many restaurant owners failed to realize was that most of their customers came from their area; so launching a campaign on the world wide web (www) was a bit of “overkill”.
As the Internet grew, IROs tried to do what the franchises were doing by creating loyalty programs, email campaigns, etc. Anything to enable people to find their websites. It was time consuming, often only reached existing customers and frankly, most did not have a thick enough wallet to maintain these programs.
Then came the 2006-2010, the era of social media. The original restaurant “stand alone” websites became dinosaurs. Restaurant owners either had to become more technically savvy or spend mega bucks to help people find their websites (which were useless to the growing population of smart phone users).
Some IROs saw social networking sites like Facebook as their savior … but lately, it is becoming a ‘parallel’ Internet where IROs online marketing efforts have become even further diluted.
It is no secret that these sites are pretty good at rounding up herds of followers, some by hopping on each others backs at times to fertilize their growth. But how did these social coupon companies gain such momentum? The answer is that they had the good sense to capitalize on the ‘herd mentality’ of people that created profiles and categorized themselves. It set the stage for coupon companies to use that data to create a product: LIKE COUPONS FOR RESTAURANTS.
Members who buy these proposed online coupons typically get 50-70% off the product or service…hence the “feeding frenzy”. However, restaurants running on a slim margin, and now being faced with a 5.3% rise in food costs can only absorb this by dipping into their own pockets.
If you offer $20 of food and service for a 50% discount, the customer pays $10 for the social coupon, $5 goes to the ‘coupon company’ and you’re left with $5. To extrapolate, if your coupon campaign is successful and you attract 100 customers, you’ll be providing a whopping $2,000 of food and services and bank a measly $500 (and that is assuming taxes and other expense don’t eat into that). That is a loss of $1,500.
You’ll often hear restaurant owners say that a “discounted chair” is better than an “empty chair”. But when you participate in these programs, are you paying coupon customers to dine at your restaurant? Or worse yet, are they dining at the expense of your regular full paying customers?
What if there was a better alternative? What if there was a real time restaurant marketing system which allowed restaurant owners and managers to create their own offers? What if you could enter promotions by yourself in real time and set your own limits? What if that was just one part of an all inclusive web marketing solution?