Groupon Case Study – Deal or No Deal?

Online coupon deals have been with us for a while now. And generally I’ve been opposed to them, especially in the early days when they were structured so heavily in favour of the coupon company.

Recently though one of my clients opened a new business – The Shore Restaurant. Its location in South Bank meant that it was in the midst of a plethora of established restaurants – they had to hit the ground running. After talking about the pros and cons with me they decided to give Groupon a go.Groupon Australia logoOne of the biggest problems associated with coupon deals is that too often the business enters the deal having not thought the whole thing through. It’s vital that the merchant knows their costs (the bottom line) and can factor in a price that they can be sure draws customers (the discount) without sacrificing too much. You need to understand why you are doing this, and what success will look like. An idea of what would constitute a failure is also good to know.

In this case The Shore did their homework. Their reasoning was sound – they wanted to put bums on seats, giving the appearance of a busy venue from the get-go. They had a unique product (serving up a buffet lunch and dinner on weekends) that they wanted to promote. At the very least, they thought, it would be a good brand awareness exercise.

The Shore decided that they would offer a 50% discount for their all-you-can-eat buffet, reducing the price point from $39.95 to $19.95. Groupon collected all the money for the deal up front as the coupons had to be purchased through them; they distributed the amount owing less their commission including GST to The Shore after about 7 days from redemption of the coupon.

It was agreed that the online sale would last for 2 weeks (but it stayed live for an extra week), with 3 months to redeem the offer. Remember, if the coupon is not redeemed the merchant gets nothing.

The Shore worked out what ratio of coupon customers to regular diners they could have in any one sitting, and they prepared their staff for the onslaught of bookings that they could expect as people hurried to redeem their coupons in a time favourable to them. They made sure that their staff were aware of the conditions involved as well.

Google Analytics graph - the week before launch

Google Analytics graph – the week before launch.

The day the deal went live it was everything they had anticipated. The phones rang wildly, and the website was swamped with people checking the menu.

Google Analytics graph - the week of the launch

Google Analytics graph – the week of launch.

Few people want to buy a deal only to find out they can’t use it for months because everyone got in ahead of them. The Shore had timed their offer to coincide with a period in which there were no major celebrations like Mother’s Day, and so were generally able to fit people in to their preferred dates.

Just as importantly though they weren’t too rigid in regard to their ratio – the aim of the deal had been to bring people in to the buffet, and they didn’t lose sight of this aim. Remember that customer service shouldn’t be discounted along with the price. You want these people to come back!

And since then?

In almost every respect the deal has been a winner. Over 800 coupons were purchased, and most of these were for multiple diners. In the four weeks since the deal was launched more than a quarter of the coupons have been redeemed, and the response from customers has been overwhelmingly positive, with many saying they would come back again.Groupon voucher

My only issue with the deal relates to marketing. Groupon did an excellent job in promoting the offer, but then that’s their business model. Unfortunately they don’t share the database that takes up the offer with the merchant, making it hard to conduct further marketing to those customers.

Yes, there are ways you could collect those details yourself, but I believe you shouldn’t have to. In my opinion it’s the one factor that still tilts the deal too much in Groupon’s favour.

The last word should probably go to Ellie James, manager of the Shore Restaurant, and the person responsible for the deal.

“Would we do it again? Maybe. The deal served its purpose – it brought attention to the new venue, it brought visitors to the website, it put bums on seats. Job done, for now.”

My thanks to Ellie and John of the Shore Restaurant for allowing me to share their experience with you.

Have you done a Groupon deal? What was your experience like? What lessons did you learn, and would you do it again? I’d love to hear from you.

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About Jeff Polley

I'm interested in life and making the most of it. I have a fondness for good coffee and scintillating conversation. I don't act my age. For more you can follow me on Twitter - @xmpieman
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