September 18, 2009
Hey, Ellen, should we do Groupon?
Ben Bernanke may have declared the recession over but it seems a lot of restaurants have decided to jump off the cliff any way and discount. Specifically, using Groupon.
Now, I love Groupon, have used it myself and even have a Groupon on my desk right now (not for dinner). And Groupon is a good thing, generally, in that it can prompt a youngish cadre of customers to beat down your door.
But you'll certainly experience Groupon #FAIL if you treat the Grouponistas, in the recent words of one chef, as "Not Real Diners." That's right, the chef in question, who invited the vampire in the front door, was then pissed off that a bunch of discount-lovers didn't throw down for the Calera. Really?
So, let's review.
1) Desperate owner agrees to Groupon in order to get people in the door.
2) Grouponistas jump on the opportunity to eat in one of Chicago's premier restaurants at a price they can actually afford.
3) D-day arrives and the Grouponistas start flooding the restaurant. They order smart, staying in their budget, sharing food so everyone can try as much as possible, probably order one glass of wine or stick with water.
4) Servers start to notice a trend: no extras, no wine upcharge, small tip.
5) Because the Groupon needs to be handed to server at start of meal, server knows what's coming and they, well, let's say they act accordingly.
6) Owner is happy to see a full restaurant but begins to see no value in the diners eating there at all and the servers are grumpy.
7) Groupon period is over, restaurant goes back to desperately empty and has a bunch of new bad gossip on the street and online about just how rude and bad the service was. So bad, the "reviewer" probably decided the food sucked too.
So, if you are thinking of calling me and asking me if Groupon is a good idea, there's your answer.
And don't think, dear owner, that your well-trained staff would "never" do this to anyone in your restaurant. I've heard tell it happened in many a fine restaurant around town.
I think this is an extreme situation described for one particular type of restaurant. Perhaps Groupon isn't right for some restaurants or restauranteurs but perhaps right for others. Additionally, I would use Groupon for restaurants because I *normally* spend $$$$ in restaurants but cannot right now. And I would most certainly tip accordinly if treated well. I know I don't stand alone, I have fellow food-loving friends who also use Groupon.
I think this is an extreme situation described for one particular type of restaurant. Perhaps Groupon isn't right for some restaurants or restauranteurs but perhaps right for others. Additionally, I would use Groupon for restaurants because I *normally* spend $$$$ in restaurants but cannot right now. And I would most certainly tip accordinly if treated well. I know I don't stand alone, I have fellow food-loving friends who also use Groupon.
Hey Ellen,Thanks for the thoughtful post. As the founder/CEO of Groupon, you can probably guess my position on the issue, but I'll try to stay balanced :-)In a random survey we conducted, we found that 1) 97% of featured businesses want to be featured again, 2) 90% of businesses have noticed Groupon customers turn into regular customers, and 3) for restaurants in particular (at least the ones that tracked the data), the average actual spend of a Groupon customer is 50% - 60% greater than the value of the Groupon. In other words, overwhelmingly, businesses have been pleased with the results.When we started Groupon, we knew that if our users were bargain hunters scavenging the Web for deals, the exact pattern you describe would take effect and we wouldn't be long for this world. That's why we designed Groupon for people like us: young people who are overwhelmed by all the stuff in a huge city, that might use a great deal to nudge them out the door and into new experiences. That's why we only work with well-reviewed businesses. It's why we eat the expense of a 12 person editorial team that researches each business we feature, and even films interviews with the business owners (eg http://bit.ly/U6Wl7). It's why we use collective buying to offer each deal - so business owners can give customers a great offer without cheapening their brand. It's all to make sure we attract awesome customers - and it seems to be working (here are Groupon's customer demographics. What we hear from our customers is that Groupon is a tool they use to discover their city - the deal is just a trick to get them off the couch. :-)I'll share something that the owner of Just Grapes told his staff about their Groupon offer: "we've already invested in Groupon customers, so let's treat them exceptionally well to make sure the investment pays off." That seemed to work - they've been thrilled with the results of their Groupon.Thanks again for the feedback - we're certainly listening, we won't be satisfied until 100% of our featured businesses are elated with their Groupon experience. If you have any suggestions, send them my way! andrew@groupon.comYours Truly,Andrew Mason
Andrew should post the financial details of how restaurant Groupon deals work - only the most desperate operators would do it because with such deep discounts - and most restaurants' margins so slim already - they can only hope to cover their cost at best. and those customers are not coming back at full prices.it might work better for other services but for restaurants, it's an awful, desperate deal
I can't speak for everyone who uses Groupon, but I got to say when I use Groupon the following happens:
1. I treat the Groupon as a freebie and spend as much as I would normally. For instance, if I typically spend $40 at a restaurant, but have a Groupon for $40, I'll spend another $40 because I normally don't get a meal valued at $80.
2. I tip as if there is no Groupon. Just like for Yelp dinners or when a friend gives me a discount at the restaurant. I tip for the full and actual price of the meal at 20% rather than the price with discount. Groupon also encourages this on their website throughout for newbies to discounted meals.
3. The people you're describing aren't people that I would want to eat with or be friends anyway. These are people who hide rice in miso soup at all-you-can-eat sushi buffets; they don't care about quality, just quantity/cost.
4. You're absolutely right. If a restaurant treats me differently because I have a coupon they volunteered, I'll bash them to everyone with an ear like Grocery Bistro. Don't offer a discount if you can't afford to keep up service.
Writers are not appreciated enough, keep up the great writing.
Andrew Mason's comments are somewhat curious. If Groupon wasn't courting coupon-cutters, why would they use the phrase "at a price you can afford" to promote their deals? If the customer couldn't "afford" the meal at full price in the first place, what makes Mr. Mason think that same customer will be able to return when the coupon is no longer available?