Before your restaurant decides to jump into Groupon, Living Social or using any daily deal, it’s important to understand the pros and cons of using one. Here are the key things to watch out for when using one for your restaurant.
A Daily Deal Site Like Groupon or Living Social Can Raise Awareness of Your Restaurant
The larger the daily deal site, the more it’s going to drive awareness of your restaurant. The big players such as Groupon or Living Social can easily sell 1000-2000 vouchers a day the way it has for Adesso and Trees Organic in Vancouver. With a huge e-mail list of hundreds of thousands and mobile users, your restaurant will get known for 24 hours.
Short Term Cash Flow
Part of the lure of these daily deal sites is also the fact that some, not all, can offer a quick influx of cash that can spread anywhere between 2 weeks to 3 months. This depends on the type of contract and company you work with. Groupon tends to be inflexible in their terms when working with first time restaurants, while smaller, more local daily deals will tend to be able to pay you much faster. This quick cash boost can be helpful during slow business seasons.
100% Profit from Unused Vouchers
Many vouchers never end up being used due to impulse buying. The numbers for restaurants vary, but the number of unused vouchers usually range between 10%-30%. Which means that your restaurant reaps in the cash from these unused vouchers, and you get to keep the money for not serving food. These unused vouchers are pretty much 100% profit.
So what are the Cons?
It Attracts a lot of Customers That Have Been to Your Restaurant Before
A lot of people that end up buying a daily deal from your restaurant have probably either visited your restaurant in the past, or have heard about your restaurant before. Which means there’s a good chance that you’re attracting people that are already aware of your restaurant. If you’re hoping to attract a ton of new customers then chances are that’s not going to happen.
The main reason why some restaurants are able to sell so many vouchers is because they already have a long history in Vancouver or any city. People already know of their restaurant brand. If you look at new pubs that most people aren’t aware of, or have never heard of, they’re lucky if they can sell 100 vouchers.
It’s a Net Loss New Customer Generator
It’s almost always a net loss generator. If you do the math properly, and know your food costs, then chances are that any daily deal site that gives that makes you discount 50% off, and then you get 50% of the remaining means that you’re lucky to break even if all your food costs are 25% and below. Which is pretty rare. Once you include the potential labour costs, then you’re definitely at a lost.
It’s Always a Quick Fix.
Groupon and Living Social were never designed as long term solutions. They’re really temporary solutions to a restaurant. Rarely has Groupon saved a business the way that that Search Engine Optimization or a good social media marketing team has over the period of 3 – 6 months. I’ve heard too often from consumers that say, “I would go there, but I wouldn’t pay full price for the meal.”
You have to think in terms of what kind of consumer these daily deals are attracting. If they are attracting new customers, chances are they’re there because of the deal. And the next day they check out another deal. Developing loyalty among your Groupon users is extremely hard.
That’s why I’m a firm believer in social media, and general marketing strategies that integrate with it, if a restaurant chooses to use one.
It Cheapens your Brand
I’ve always told my clients the same thing, it’s okay to use them once, and once only. I once knew a restaurant that used a daily deal 3 times within 3 years, they eventually went under.
other one I know is currently in business and is now also doing it for the third time. I can tell you from my own personal experience, I like the place a lot, but now knowing they’re willing to do it a third time means that I can patiently wait for them for their next Groupon offer before I go.
Doing it too often cheapens your brand, and people are very conscious about where to spend their money. If they know you’re going to discount, you will be known as “The Discount Restaurant.” And less and less people will pay full price for your food as time goes on.
A good restaurant marketing strategy will help your restaurant grow for the long term and help it not only thrive for a month, but for years. If you’re interested in knowing how a great restaurant marketing strategy can boost profits and sales for your restaurant then feel free to contact us at MCNG Marketing.