Friday, July 15, 2011

What's the deal? The daily deal, that is.

Groupon and company. You know what the daily deal is all about, you probably receive the emails. My own inbox is inundated with offers for 50% off massages, dinners, fitness classes, theory, I could indulge in a full year of a recreational smorgasbord, having never paid more than half for any of it. Ironically enough, I have never purchased a single coupon, not even the most tempting (I'm still kicking myself for not jumping on the Sel De La Terre one)...I'm either lazy or guilt-ridden. Not sure. Anyway, now that I'm with Saus and all (we're kind of an item), I'm on the other side and I can give you the pros and cons from a merchant perspective.

A hot second after we opened, we were being approached by sales reps for these daily deal services. I was eager to meet with them to garner their specific value propositions so that I could make an informed decision about whether or not to offer a deal. Here's what I garnered...they all offer pretty much the same thing...a sh*t load of subscribers. Most of them require the merchant to offer 50% off goods, and most take half of the revenue from the deals sold. With food costs that are typically 25-30% of sales, it doesn't take a mathematician to realize the disadvantage.

There are benefits, however. I expressed my concerns with the reps I met with and every single one of them was willing to work with us. We have been given the option of capping the number of deals sold, negotiating a more favorable split, tailoring the deal so that it reaches only a certain demographic, etc. The point is this: don't jump into a deal that could potentially put you in a hole, but don't write off the idea buying deals are sometimes necessary to boost business.

We ultimately chose to run a Yelp deal, for two reasons: 1. Yelp has, from the day we opened, brought customers through our door (I can't think of many other deal platforms that can claim this). 2. Yelp allowed us to choose the contents of the deal so long as it had a $20 value (1 order of Belgian frites, 2 sauces, 2 waffles, 2 waffle sauces, and 2 sodas). That way, we had control over our costs and were able to offer a well rounded Saus experience.

The group buying sites are becoming more innovative with their offerings to merchants. LevelUp is a great example: they offer three levels of deals...after a subscriber buys the first deal, he unlocks the second level, which if bought, unlocks the third - with each subsequent deal being better than the previous. The idea is to foster repeat business and, better yet, to track it. Groupon is experimenting with an interesting platform called Groupon NOW, a mobile app that shows users deals that are going on near them, and that must be bought and redeemed in a short (say 2 hour) time frame. Groupon NOW has the potential to be a valuable tool for restaurants looking to fill seats during slow times or bad weather days.

Oh, and I thought about it. I'm 50% guilt-ridden and 50% lazy.

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