Groupon is bad for your restaurant, I have a better alternative.
I see some restaurants running Groupon deals. Even well established ones that have been around for a while.
Consider the sushi restaurant deal on Groupon shown in the image below.
To keep it simple, lets just consider the first deal offered by the restaurant.
A $40 meal for 2 is being sold at $20 (sometimes at $17.43). The restaurant is losing $20 on each deal due to the discount.
Out of the $20, Groupon usually takes about 50% so the restaurant gets $10 and is losing additional $10 on each deal because of Groupon’s cut.
The restaurant also has to pay 7% for credit card processing to Groupon.
If the restaurant sold 5000 of those deals, they lost (20+10=30) x 5000 = $150,000 in revenue while they earned 10 x 5000 = $50,000
After Groupon deducts 7% credit card fees, the restaurant get $46,500.
The revenue loss of over $150,000 with Groupon has additional impact on the business.
Groupon hurts small business
- They could have earned more profits, paid their employees higher wages / better bonuses and retained them longer if they charged full price.
- Aside from the fact that Groupon customers are not loyal, you cannot send them other offers through Groupon and you have no way to reach out to them again.
- Groupon keeps you busy, while bleeding you dry 50% of small businesses in US fail in the first 5 years because they cannot sustain themselves. In other words they are not generating enough profits for the owners to keep them open. Because Groupon customers come to the restaurant as long as you run the deals, you get a false sense of security that your business is doing well. It’s only after you deduct all overheads and look at what’s left in terms of profits, that you realize you barely break even or in most cases, you lost money.
- Because your profit margins are so low / non existent with Groupon, the restaurant owner spends more time in trying to stay afloat rather than working on growing their business
The Groupon alternative
I’m sure they could get much better results / ROI for their restaurant at just a fraction of the cost
- They could run the same deal which they are running on Groupon, directly using Facebook and Messenger bots and even at half price, they would earn an extra $50,000 which they were giving out to Groupon.
- Or they could implement the Birthday Party Magnet which I explained in the article on restaurant marketing with Messenger bots and Facebook.
The Birthday Party Magnet is a 4 step process that produces excellent results
- A Facebook post / ad that offers a free meal to the birthday boy/girl when they comment on the post and if they spend a specific amount at the restaurant.
- Messenger bot that automatically responds to their comment and gives them a coupon.
- The automated follow up which reminds them to come to the restaurant without being pushy.
- The coupon redemption at the restaurant – where the server enters the total bill/check amount and the sales data is recorded in Google sheets
The benefit of this campaign is that:
- Most people who redeem the coupon come to the restaurant with friends, so you easily recoup the cost of the free meal for one individual
- Assuming your food and service was good, you have a good chance that everyone in that group will return to the restaurant in future
Why Messenger bots are better alternative
- With a messenger bot campaign, you know exactly how much you spent and how much you earned through the campaign
- With Groupon, you cannot reach out to Groupon customers with other offers but with our bots, you build a list of your customers that grows every month
- You can send out other offers to these customers which increases the lifetime value (LTV) of the customer. It’s like having your own TV Channel or Radio station with a dedicated audience.
- Messenger bot with Facebook works much better than Google Ads for restaurants and delivers higher ROI
- Even if you run the same offer as the one on Groupon, you would still earn more when advertising directly to your customers
I’ve seen messenger bots work for every kind of restaurant from food trucks to steak houses.
Most restaurants are not keeping up with technology and are not aware of the possibilities.
Many restaurants are still using custom iPhone / Android apps. Unfortunately, no one wants to install another app on their phone.
The percentage of restaurants that can get their customers to install an app is extremely low.
Its better to spend that money on advertising and the right marketing strategy that generates long term revenue.
Contact us on Messenger if you are looking for more customers for your restaurant or you want to take your restaurant to the next level.
