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Why Groupon Will Fail

Spiro Pappadopoulos

When you look at your marketing options, Groupon should be the first off the list. This is a fact I will outline for you in detail. I have linked you to some of the most poignant and well written articles I could find to back my claims up, so on with it:

Why Groupon will Fail.

Groupon represents a trend sweeping the country, the group buying craze.  Fueled by the recession, retailers, service providers, and most actively restaurants are allowing Groupon to sell certificates for a certain amount of buying power (say $50) most often for half price ($25). The consumer gets a whopping 50% discount, and as you might expect the certificates are selling like crazy.

Groupon then turns around and pockets at least half (sometimes all) of the sale price ($12.50), and forwards on the remaining $12.50 to the small business owner who is responsible for supplying the consumer with the $50 worth of product. The fact that merchants would be willing to make such a deal is indicative of the state of the economy. It just isn’t a good deal for them, and already some are publicly complaining that their ‘promotion’ has led to huge losses, and they must tough it out while the thousands of certificates that Groupon sells come in.

Outside of profit and loss, what are some of the symptoms of this Groupon fatigue? Among the worst:

1)   Customers who are ‘deal hawks’ that only visit for the deal, not to ‘discover’ new places, and become regular customers.

2)   At restaurants groupon holders who only tip on the discounted total not the normal amount, leading to staff fatigue and resentment.

3)   Overwhelmed merchants whose reputation is damaged with their full price paying customers because they are unable to provide the same level of service when all the Groupon wielding customers flood them after an offer.

These reasons compound the fact that it is a bad deal for business owners to sell their goods at 75% off. I mean is it that hard to figure out? I don’t care how flashy their marketing is; it’s bad business, period. Businesses have been struggling to make a profit for the past few years, and running 75% off specials is only going to make it harder.

So expect to see Groupon start making the deal better for merchants as more and more get burned, or just reject the Groupon come on in the first place. Groupon will have to lower its take in order to continue to sell. When you ask a Groupon merchant if they think it was valuable to them, you are likely to get the answer ‘Yes we feel that we got exposed to a whole new group of customers that we hope will become regulars’ the truth is that privately many of them would tell you that they are very glad the onslaught is over and they can get back to selling at a profit.

Groupon will fail because it is a short term fad marketing ploy, that will not inspire repeat enrollment among merchants, other than those who game offers to trick consumers into a deal that really isn’t. So Groupon will expand rapidly and then begin its inevitable transformation into a modern day direct mail marketer with a ‘pay ahead for a discount’ value to consumers. That transformation will not justify the lofty valuation placed on it by investors and will likely lead to its acquisition by a larger firm, and the end of Groupon as we know it today.

At GuestFeed I advise my clients to not get lured into a deal with Groupon, or any of the other copycat group buying firms cropping up everywhere. It seems all you need is a big email list and some true believer sales people to hit the streets these days. I urge my clients to do the math and to really break down the numbers to discover the real cost of such an offer. It is hard work running a restaurant and even harder when you are doing it to lose money.

For consumers a great deal, for merchants a big mistake. What do you think? Have you had any experience with Groupon you would like to share?

I am here to talk it over anytime, just hit me up. Twitter: @spirocks

****UPDATE****

I plan on updating this post as more stories surface regarding small businesses experience with Groupon.

Consider the Boston Herald piece in which Jeff Gates, one of Bostons most successful restaurant owners said:

“They (Groupon and clones) are deflationary weapons of mass destruction and are very, very dangerous for the restaurant industry to get involved in,” said Jeff Gates of Aquitaine Group. “I don’t think restaurants realize how challenging the bottom line is without giving half off to your customers. (They) lose track of what they’re giving away.”

None of Aquitaine Group’s six restaurants – including Aquitaine Bar a Vin Bistrot, Metropolis Cafe, Union Bar and Grill, and Gaslight Brasserie du Coin – offer the deals.

Here is the piece itself followed by several more stories below:

Clipped from: www.bostonherald.com (share this clip)

Recently Entrepreneur wrote: “A recent study by Rice University surveyed 150 small to midsize businesses that had used Groupon, asking about their social-coupon experience and whether they would use the service again. While 66 percent of the 150 respondents said that their Groupon deal was profitable, a significant 32 percent found it unprofitable. And 40 percent of the respondents said they would not use Groupon again — notable, considering Groupon claims that at least 95 percent of its sellers request to be featured again.

Before you jump on the social-coupon bandwagon, make sure your business can handle it. Here are five Groupon nightmares that could happen to you — and how to avoid them…”

Here is the article:

Clipped from: www.entrepreneur.com (share this clip)

Then there are others who are writing about warning signs regarding Groupon’s future. The likelyhood of a fad type waning of interest and saturation of market with competitors is written about in this article which provides some interesting historical references:

Clipped from: bostonvcblog.typepad.com (share this clip)

Clipped from: spirocks.com (share this clip)

Thanks for reading.

Filed Under: Food and Drink, Tools Tagged With: fail, Groupon, restaurant marketing, restaurants and groupon

Example: Real Time Social Media Customer Relations

Spiro Pappadopoulos

Recently I wrote a post about how your customers view social media as real time, and today I had a experience that serves as a good example to share: (name and face blacked out for obvious reasons)

Here you can see a customer and Facebook friend of Evenfall Restaurant, sent a Facebook message complaining about the name of one of the cocktails that Evenfall sells. You can see that at 1:19pm the customer was bothered enough to send an email about it, and by 1:35pm had a response from Evenfall. That is real time customer service, it wasn’t a day or longer, it was minutes.

Evenfall was able to reach out in the following way:

Now this customer may be so turned off by the name that she will never return, which is not at all what the restaurant wants, nor any of us at GuestFeed, but she did receive an immediate response. That response was not defensive, harsh, or untruthful. It provided an explanation and a link to more information. What the customer decides to do now is up to her, but the restaurant was able to demonstrate that it cares what she thinks without a shadow of doubt.

So social media gives you this opportunity, what you do with it is up to you. At GuestFeed we strive to take advantage of every one of these opportunities and drive the message home; The restaurant is listening, we care, we want every interaction with us to be pleasant, human, honest, and beneficial. We believe that the vast majority of people respond to that type of communication in a positive way.

If we hear back from that customer I will share that as well.

***UPDATE***

We did indeed hear back from the customer, and you can see the results of the real time communication here:

What do you think, have you had success with this? I am here to converse, or hit me up on twitter @Spirocks

Filed Under: Facebook, Food and Drink, Google+, Twitter Tagged With: caring, customer relations, immediate response, listening, Real time, social media

3 Reasons Why Accepting Online Reservations Is Important

Spiro Pappadopoulos

Recently I started working with a new client who has not yet decided to use an online reservation system. As I prepared my reasoning for why his restaurant should, I decided to write it here for you.

1) Online Reservations accept your customer’s requests when THEY want to reserve a spot at your restaurant. 24/7 anytime they want. Social media never sleeps and a diner who is surfing early in the morning can click and make a reservation when they see your F page, web page, twitter feed etc… Plus: If their call goes to voicemail at your restaurant it can direct them online for ‘Immediate Confirmation’

2) Information Collection, many restaurateurs can talk until they are blue in the face about getting emails from customers, but employees are resistant. Online reservations basically require that the guests provide an email. With opt in check boxes your email list can bloom. That is money in your pocket.

3) Reminder Tweets & Facebook posts at the ideal times can be distributed to provide direct links to the online reservation page from each social media titan. Remember these are people who like your restaurant enough to follow you on twitter and/or become a friend on Facebook. They are ripe and proven customers who you can reach out to unobtrusively with these posts providing a simple way to make their plans. No hassle = better results.

~ Basically a very good online reservation system is going to cost you approximately $150 a month. That is $37.50 per week, for a tool that makes it easier for your customers to visit you. How many reservations would you have to get per week to justify this expense and add it to your online marketing efforts?

Let me know what you are using, why you are not, or what I can help you figure out about the various services. I am always here to talk, or on twitter @Spirocks.

You can reserve at my restaurant here: Evenfall Online Reservations

Filed Under: Food and Drink Tagged With: email collection, online reservations, restaurant

Give your Wifi Away. Now.

Spiro Pappadopoulos

You spend time on promoting your restaurant via social media right? Then why are you among the restaurants/bars/cafes that do not give free wifi to your guests?

In case you are missing my point: Your bar or restaurant needs to offer free wifi, period. 6 Reasons Why:

1) It costs so little. You already have Internet access at work right? If not please close this browser immediately and accept my apologies and condolences. Anyway, your connection is paid for, the only investment you need to make is (maybe) in a new router that can grant public access. Today there are routers that require zero set-up and have a guest access feature that allows you to securely share your wifi connection with guests on a separate wifi network. Such as the Cisco-Valet Plus Wireless Router which offers a password you can give to guests to log into the guest account. It is easy to setup and costs $78 or so. I use one at Evenfall and it is very easy to manage. So for $78 you can start sharing worry free.
2) Sharing your Wifi encourages social posting. After all you do to promote your place socially, make it easy for the guests to check-in etc when they are there. Wifi offers better speeds and encourages a quick share session.
3) People who use Wifi will come more frequently. I never used to go to Starbucks, then I heard about the free wifi, now I find myself there about two times a week, sometimes I take my mac book and drink a coffee or two and do some writing, or work for one of my clients, or my own businesses right in Starbucks. Now I may only spend $10-12 bucks a week there but that is just me. I imagine there are plenty of new Starbucks customers who may be more inclined to visit now. Again the ongoing cost is no higher than now… think about it. Check out this video from a Starbucks, full of people on their computers and phones:

4) It is more important than ever to offer free wifi because the mobile carriers are switching their Data plans and they are going limited. So data lovers feel a subconscious nervousness about using heavy data on the road. If your place can be a mental data oasis that they can stop by, spend a few bucks, and use wifi that is great for you. It is also bad for you if the guy down the street does it and you don’t.
5) You can advertise it. In fact make sure you advertise it. Even if you don’t relate there are people out there who will love that they can use their devices at your establishment. So get the word out. Menus, signs, a line in an email, twitter feed, facebook page… let people know. If of all your contacts 20 become more regular customers is that a plus? Yes it is.
6) People stay longer when you offer wifi, and they buy more. Now I am not suggesting this is a panacea for a horribly run business, or a bad idea, but you aren’t reading this blog because you don’t care or have no clue. An remember a nice crowd draws in other business too… so share your wifi.
What are you saying to your guests that open up their phone and see that you in fact have a wifi network, and it is locked so they can’t use it? Its a bad vibe… so do what you have to do to offer a free wifi connection to your guests. The router I mentioned before (Cisco-Valet Plus Wireless Router) is literally plug and play. But if you want to go even cheaper than that, get a wireless router and plug it into your current router and set up an open wifi network on that one for your guests. It really is that easy, and it will pay for itself really really fast.
Thanks for reading, if you have any questions, hit me up here, or @spirocks on twitter. And if you have a desire to give your restaurant a technology makeover that will save you money and bring in more business, ask me what Guestfeed can do for you, here or @spirocks I love to converse.

Filed Under: Food and Drink, Tools Tagged With: best router for restaurant, free wifi, restaurant promotion, social media sharing, wifi

Social Service: Six Ways to Shine

Spiro Pappadopoulos

Exceptional service doesn’t just start when a guest arrives anymore: These days it starts online when a guest is choosing where to eat.

Here are Six ways to make your ‘Social Service’ exceptional:

1) To begin with your social presence should be welcoming, friendly, and courteous. You want people to feel your humanity in your responses to them, in your broadcast about what you do, and in the way you translate your passion for what you do. One example of this can be found in a post I wrote about real time customer service. Notice the tone and approach taken with the customer, and most importantly the outcome. Because the response was prompt, courteous, and friendly. She will return and likely with a greater connection to Evenfall than before.

2) Your social presence should be knowledgeable in your niche (whether a burger joint or a caviar shop). You should be a beacon of information that help people learn more about what you do in your niche, and what others are doing/writing/saying about that niche. If you make hamburgers, you would explain why you chose the type of bun you had, and share stories about the world record breaking burger in New Mexico. You want to develop a reputation as a source of honest commentary on your topic.


A Mediterranean Restaurant, establishing its authority via twitter…

3) Your social presence should also be efficient, and that means being respectful of peoples time, not loading them up with post after post about what you are doing. It is a balancing act that you understand as soon as you come across someone who does too much of it.

4) Your posts will serve best if they are well timed, reaching your guests at the times they are most likely to be making a decision about where to go, what to eat, etc.


Note the timing, the photo, and the brevity.

5) One of the most crucial is to be consistent, your social presence can not offer great service unless it is. People with passion for what they do, do it all the time. Even if you don’t have a passion for social media marketing your business, if you do it at all it needs to be consistent.

6) Exceed Expectations with your social interaction, reach out to guests quickly that ask about something you do. If you do it will lead to amazing guest experiences that will translate into loyal customers, and the creations of ‘social evangelists’ like in the post linked to here.

These six steps can lead to an amazing following online, and most importantly at your business. It is what we do for our clients at GuestFeed everyday so I know it works. If you would like to chat about it I am always up for that here or over on twitter @spirocks… till then happy holidays.

Filed Under: Food and Drink, Tools

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