Groupon For Restaurants Should you stop using Groupon and start making money in your Restaurant?
Groupon For Restaurants
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On the surface, Groupon may seem like the perfect promotion platform for restaurants, although it may work well for some small restaurants. Should be very aware before signing on the dotted line with a Groupon promotion
It might work in some cases but not for the majority of small businesses.
Groupon Will Be Expensive For Your Business
If you have already been looking at Groupon, you may well have already seen some of the horror stories. That comes hand in hand with this platform. But the reality is Groupon is hugely expensive.
This is not easy to glean from the faqs on the Groupon website. When you look at the FAQs, you would be forgiven for thinking that Groupon runs ads for free.
This certainly isn't the case. Groupon takes 50% of your revenue as their fee for running their service. That is the money they are keeping, meaning that you are now losing money by running a Groupon promotion.
So let's say that your average dining party would spend $100 on their meals.
Groupon will tell you that you should discount this by 50%, giving you a remaining $50.
Now, this is where it gets even worse for your restaurant. Now Groupon will charge you a further 50% as their cut, meaning that you will get paid $25 for something you typically get $100 for.
That means for each party you serve. It costs you 75 dollars. Unless, of course, you have a 400% mark up across the board.
What seems attractive in the first place about Groupon is they run the ads for you and send you the money. But, unfortunately, it isn't until you sign up that you realize how much money Groupon actually costs you.
Repeat Customers
Okay, so you might well be saying to yourself, but I will get more repeat customers.
But sadly, if you have used Groupon yourself, it is very rare that you will walk away thinking that it was a great restaurant. Instead, what happens typically is your customers leaving feeling I got a significant discount.
Do you think about word of mouth?
It gets worse as I'm sure we have all done the same. Rather than recommending a restaurant on the quality of the food or service, you say to a friend, "you should sign up with Groupon. I got a great bargain at Your Restaurant."
And can you guess what happens then? Well, that new word of mouth referral starts to go to all of the other Groupon restaurants. And they are getting their deals. Never to be seen again.
You Are Building Groupons Business
By using Groupon for your restaurant, you are taking away what your restaurant is offering. Although Groupon provided the customer with the bargain, Groupon made buying the deal fun and exciting.
It is Groupon that your customers go away bragging about
Losing Value In Your Business
When you offer a discount on your menu in Groupon, people always ask, "what was their makeup before that they could afford such a discount?" Of course, this means that they asked what the deal was before, and you were selling for less.
When a restaurant offers a discount of 50% on Groupon, the perception is that the markup is already extremely high. So if restaurant x can offer a discount of 50% and still be in profit, they must have been jacking their prices up in the first place.
Groupon trains your customers to wait for significant discounts and only dine at restaurants that offer them.
Lose Your Loyal Customers
There seems to be nothing worse for a loyal restaurant client than seeing that their favorite restaurant is now offering huge discounts to new customers. Understandably they will feel cheated and more than a little ripped off by the restaurant.
By taking a loss using Groupon to gain new customers, you are forcing your new customers to make up that loss. This is the very opposite way that loyal customers should be treated. Your regulars should be the ones who are getting the rewards and perks.
There are two possible outcomes when a regular customer sees one of your Groupons. First, there's a good chance that you'll be the recipient of mixed emotions from your regular customers when they see Groupons. In one case, this could lead to an angry customer who shops with another competitor instead.
Or another scenario where these same people buy all their gifts at a fraction of what it would usually cost them because they don't want others to feel like they're being ripped off now they are also getting discounts and not paying, The full price themselves!
This would mean that you are losing out with your regular clients and your new clients, as you are now making a loss with them both.
Groupon is a shortcut with significant consequences.
On the plus side, you will get more customers upfront, but you will lose a lot of money.
Rather make your restaurant more attractive to future and present customers by setting up the correct marketing strategies.
Read on to find out how restaurant accelerators can do just that.