Wednesday, October 13, 2010

Do restaurants get a good deal with Groupon?

Posted By on Wed, Oct 13, 2010 at 8:50 AM

Cafe Trio was a hit on Groupon.
  • Cafe Trio was a hit on Groupon.
Cafe Trio was a hit on Groupon.
"A good deal? That's a tricky question," says Chris Youngers, co-owner of Cafe Trio on the Country Club Plaza.

Groupon has sold more than 2,600 half-price coupons to Cafe Trio. Youngers admits he won't make much money off the deal, but he says Groupon has been effective in "getting the right people through the door."

The right people?

"People who tip correctly on the coupon and treat the staff well and are comfortable with our clientele," Youngers explains.

A recent study conducted by the Jesse H. Jones Graduate School of Business at Rice University has a different slant on Groupon: Restaurants, it says, are getting a raw deal.

Groupon, a two-year-old social promotion site, features a daily deal in the cities where it operates. The coupons are designed to offer consumers a significant discount for the featured deal; the discount is valid only if a minimum number of consumers purchase the coupon. The Rice University study "conducted surveys with 150 businesses spanning 19 U.S. cities and 13 product categories that ran and completed Groupon promotions between June 2009 and August 2010."

"Groupon promotions," according to the study, "were profitable for 66 percent of the businesses surveyed; however more than 40 percent of the respondents indicated that they would not run such a promotion again. Among the service businesses (restaurants, educational services, tourism and salon and spa) restaurants fared the worst; salons and spas were the most successful."

Youngers isn't sure how many new customers -- the ideal in terms of using Groupon as a marketing plan -- Trio's Groupon led to the restaurant. Unlike a different web-based coupon program that Youngers used (and hated), he says Groupon at least attracted customers who tipped correctly -- that is, on the full, nondiscounted price of the meal.

A local restaurateur who has been very happy with his Groupon experience is Kevin Lyman, owner of the Kokopelli Mexican Cantina in Prairie Village. He believes that, because Groupon is internet-based, its customers tend to be a younger demographic.

"You get instant customers out of it," he says. "Unlike a traditional coupon, customers pay for it up front. I've had a 78 percent redemption already and we've been very happy with the kind of customers Groupon has sent to us. You know how some promotional concepts bring you customers that you hope you'll never see again? Well, Groupon customers -- maybe because they've already paid to sit in your seats -- are restaurant-savvy. They tip well, treat our staff well.

"Have I been happy with it?" Lyman goes on. "Yes. But I read that there are restaurants that feel ripped off. I think the experience is what you make it."

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