The Groupon coupon in your restaurant

There’s been a lot of buzz lately surrounding Groupon. Whether it’s their enormous growth or the rumors of acquisition by Google, I’m guessing that you’ve heard the name pop up. There has also been some interesting discussion regarding it’s use in restaurants lately, one of the more popular from the NY Times.

A lot of the discussion seems to lead towards the extremes. Either businesses make a great return, or they have a big loss. From my research it seems that the losses may come from poor planning in preparation for the promotion. Let’s take a deeper look at this.

The Format of Groupon

Basically the customer buys a gift certificate and close to half the face value, sometimes less. Groupon in turn splits the revenue with the business, roughly 25% of the value. It’s hard to believe that any restaurant would be able to profit with those kind of numbers when looking strictly at the revenue from the promotion. Therefore, you need to take some steps in advance to ensure success during and after the promotion.

Planning Ahead

I believe that any promotion can be improved with proper planning. There is always a way to encourage a positive result if you find the key to success with a particular promotion.

With Groupon, the power lies in the amount of traffic that it can send through your doors. National chains have seen numbers in the high five digit range and small business can still get thousands with a single deal. Those (hopefully) new people will be the benefit of the promotion, not the sales from their visit. Given that, we need to ensure that we do our best to have them return again, spend some extra money when they visit and try to get as many new customers as possible instead of discounting visits for current customers.

Looking for new customers

This is what we are looking for with a promotion like this. The sales just aren’t there enough to justify it on their own. And since we don’t want to just give discounts to our current customers it’s important to look for new ones.

The caveat is that we can’t really control who buys in. But we can try to avoid spreading it within our community. That means no facebook, twitter, etc. for the deal. Let the buyers do this on their own. Does that make sense? It seems a bit counterintuitive since we want a lot of people. But, we want new people. you can market to your own network in other, more profitable ways. Instead, run a different special for your online community at the same time. Give them a reward for being loyal and strengthen that relationship.

Of course, you need to take good care of the regulars that do buy in to the deal. Don’t scoff at them for saving some money when they have the chance. Just do your best to not share the news with current customers and let them find it on their own.

Building the deal

We can use the numbers of the deal to influence how people spend their money. It starts with your average ticket amount. You want to encourage the new customers to spend a bit more than they get with the offer to help bring in a few more dollars during the promotion. If your average ticket is $40 then it makes sense to do the offer for somewhere between $60 and $75. That way the coupon will bring in 2 people that should spend an extra few dollars, of which you get a bigger share than what you get from the promotion.

The next thing to think about is the timing and the length of the deal. You want to run the promotion during a normally slow period for a few reasons. First of all it makes no sense to replace normal sales with discounted ones. And secondly you don’t want to overload your restaurant to the point that customers are turned away. It’s safe to assume that a good amount of the redemptions will come in during the first 2-4 weeks of the deal. The length of the promotion will be determined by your slow time. Try to overlap the end date a bit into a period that starts the uphill climb and hopefully you can even out your business a bit. Three months seems to be the standard. Maybe start the promotion on February 15th and run it for three months through April. That covers you in between the Valentine’s day and Easter booms. Of course, you know better than anyone what timing makes sense for you business.

And finally we want to look at the minimum and maximum amount of deals to sell. We need enough to get a good return without too many that our losses are more than we can handle. This takes a bit of calculation to figure out so we created a tool for you to use. The calculator will do the math behind the deal, just follow the directions. Play with the box for the amount of coupons to be sold and see how it affects the final results on profit. You will need to figure out which works best for your business by looking at the losses seen during the promotion and the length of time for the profits to make it all worthwhile.

The redemption period

If we have set this up correctly then we can now prepare for the new customers that are visiting for the promotion. We should be able to make some educated guesses on the following things to better prepare-

• Number of guests using the deal
• How much extra they will spend above the value of the coupon
• How our finances will be affected during the promotion

These are good things to know in preparing for the onslaught of customers walking through your door. Let’s use this to our advantage in winning over these customers and turning them into regulars. First of all, make sure your staff understands the goal. Your staff will be strained beyond normal if you have a very high number of deals coming through the door, and it’s possible that their tips won’t reflect the increased workload. The staff needs to understand that you’re doing this to get the customers back for return trips.

You need to give them tools to do this. A loyalty program is a good place to start. You should also work on inviting them into your online community through email sign ups and social media sites. In fact, why not create a special list, or group of the full list, for the folks that visit with the discount. This will let you market specifically to them given the extra knowledge you have about their visit. Another idea would be to create a special welcome package for these folks. Put together a welcome letter, copies of your menu, a list of upcoming events, your business card, a form to get their info for your mailing list (get your staff to have the customers fill it out then for better participation) and something to direct them to join you online.

Beyond those tools, ensure that every customer has a great experience. Some places will scoff at customers that are using discounts which is deadly to a promotion. Of course, that’s not you right? make sure you have plenty of “inside marketing” going on with table tents, signage, handouts, etc. to give them a few reasons to return.

The follow up period

Okay, so now we have a good promotion in place that has brought in a good group of new customers that have each spent a bit more than the offer. We have them in our marketing system via email, social media, etc. and they know what’s happening at our restaurant in the future so they have a reason to return. Now what?

Well, we need to invite them back right? Send them an email thanking them for visiting and welcoming them into “the family”. Include some of the exciting things coming up at your restaurant and give them something specific, just for them, as a reward for returning. We’re “double discounting” the same customer here, but it’s worth a ton in the information we gather. This doesn’t have to be anything expensive, a free app or drink with dinner purchase, a cooking class or maybe a hat/t-shirt/etc. if that makes sense for you. Just something that will get them back in the door that you can track. Be a bit careful with this though. you want them to know that you are giving them another discount because you’re excited to have them as a new customer, not because they should expect discounts every time. Think of the psychology behind this, they visited you because of a deal and now you are rewarding them for using a great discount. Not many people do that.

After this, you’ll have a good chance at making these customers long term. Hopefully you have a good amount of them that use the discount and return for the second offer and had great experiences both times. They are now in your regular marketing system so you can remind them to visit and tell their friends about the great experience you gave them.

Final analysis

The deal has run its course and now it’s time to look at the real numbers from the promotion. Go back to the calculator and enter actual numbers that you collected during the promotion to see your actual returns. At this point you will have better numbers for the conversion rate, average tickets, redemptions, etc. and see exactly how the promotion affected your business.

The Wrap Up

In my opinion, most promotions can be made to work well. It just takes proper planning and follow through to make them more effective. By thinking ahead and maximizing the traffic you get from a promotion of this type you will be hedging your bet that the customers will come back again and again to give you a better return on your marketing dollars.

Hopefully this post gives you some ideas that will increase your return and win over a bunch of new customers for your business. Please share your thoughts and stories about Groupon and similar promotions in the comments.

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