Tuesday, April 6, 2010

Groupons Examined

It you are not already a Groupon buyer you may have noticed the ads on this blog and in many other locations on the web. Groupon has been sweeping the Nashville food and restaurant fan community. But are they harmful to restaurants or a good marketing idea? Since they are such a big advertiser (we don't control the ads, Google places them) we wanted to make sure people knew exactly how it works and take a look at any potential downsides of Grouponing.

It seems to be a matter of marketing versus profits. The Minneapolis Star-Tribune has a good article on the dilemma, reprinted in today's Tennessean:

"While recession-weary consumers may be happy to buy a $50 dinner for $25 at websites like Groupon.com, a participating restaurant makes only $12.50 -- an unprofitable deal for the restaurant."

"You may barely break even on Groupon customers the first time," said David Rangel, Groupon's director of merchant services. "But if you bring them back once or twice, you'll get a terrific return."

"They know the restaurant industry is on the ropes, and they are offering people a quick fix. ... They are preying on people's fears," said Lenny Russo, chef and co-owner of Heartland Restaurant in St. Paul, who refused to participate in the coupon program."

Pulling new customers into your restaurant may be a good idea for new joints or established ones looking to expand a base. Breaking even on a marketing promotion is actually not such a bad deal. However, if restaurants are considering it on a regular basis you could see a real problem developing. That probably means you won't see restaurants doing this more than once, so don't get hooked grouponers.

The long and short for me, as someone who buys Groupons occasionally (only when it's a place we really want to go) is that we need to get out there and support our favorite independent and locally owned restaurants. Buy an internet coupon of some sort if you want, but be sure to keep visiting places at normal prices. And you need to check out new places you want to see prosper. Eventually the economy should improve. Until then- keep eating out Nashville...

6 comments:

jayewalking.com said...

I've always wondered about these. I have only bought 3 before but the best part about Groupon I think is the visibility it gives places I've never heard of. I star groupons in my email of places that I want to go try out, even if I didn't buy the groupon. So that's why I like them. Great post!

Heather said...

Ironic that your post has an ad for Groupon below it! But it's true, we need to be supporting local businesses with or without coupons. And if you do get a Groupon/coupon, make a point to go back if you really like the place.

Lannae said...

Yeah, I saw this article today too.

We have only gotten 3 groupons because the deal is too good to pass up, and I know I will use the entire groupon plus spend more.

I have passed up other Groupons at services and restaurants I have gone to before and know their price point because the Groupon was not necessarily a good deal for me or the business. I was wondering what kind of "cut" the groupon takes, and 1/2 of the cost, that sucks, that is worse than Ti**etmaster, and Ti**etMaster stinks.

I am glad I did not buy the other Groupons then!! For hypothetical example, there is a nail salon I have been to, and they offered a $20 groupon for $10. A no frills manicure is $10 (which is what I would get), so I opted to not pay for a Groupon and just pay the regular price and tip for my manicure. I know my full $10 goes to the business, not the internet service, and I feel pretty good about that.

mIKES said...

I have a lot of "reservations" about this Groupon and the other annual gig, I cant recall, restaurant week is it? These promotions, while elevating visibility, also tend to attract a crowd that oftentimes is not the ideal demographic for certain establishments. I love reading the post restaurant week Yelps, Citysearches, Urban Spoons, etc, etc. All manner of outraged people expecting a multi course affair with wine, woman and song. Remember - you get what you pay for. You are better off paying for what you can afford. And if you want to find some grand new experience, you are already reading the right blog for that....

Keep up the good work folks~!

Eric and Katie said...

It seems that as a marketing tool Groupons might have some value...but I agree that I would probably rather just get a good deal directly from the restaurant, where they take in much more profit and it helps them grow and survive.

Shannon Bates said...

Great and informative post!