As a consumer, I totally get Groupon, Living Social, Amazon Local, and the host of other services like this. I get a good deal (if I ever actually redeem the coupon) (I have a bundle of expired ones), I am (hopefully) introduced to someplace new, and will (hopefully) return again and spend real money.
Does it work? Yes and no. There is plenty of research that shows running a promotion like this creates a lot of traffic, but repeat business is not so hot.
At least not strong enough to generate a positive ROI on the promotion, as from the initial sales, the restaurant is receiving half of the highly discounted offer Groupon has distributed; Groupon keeps the rest (plus credit card fees, returns, etc).
Example: your joint is offering $40 worth of food and drinks for 60% off. So this is sold on Groupon for $16, and you’re going to gross $8 on the deal. (I understand the fee split can be negotiated, tho, as is the time it takes to get paid).
$8 for $40 worth of your inventory. Yikes. And don’t forget the credit card fees and returns and such. So let’s say you’re getting $6 on $40.
Now any of these services have massive reach, and you’re going to receive (hopefully) a bundle of cash at the onset of the promotion, and that will help you out for the current month, and you cross your fingers everyone won’t come and redeem the coupons in the same week, or month even.
Here’s what I’d like from you dudes in the restaurant business. Run these specials IN-HOUSE, or to your own email list, or by putting them on your website, or spending miniscule amounts of money to advertise them in places like the Patch.
You get to keep ALL the money, you don’t have to wait for it, you get to WRITE your own copy, and you get to dictate redemption times.
I’d rather give you the money.
