Groupon is a platform that allows a restaurant operator to manage its coupon program better: coupons will not be issued until a critical mass, determined by the operator, is reached.
The basic idea behind Groupon reaches back to Thomas Schelling's articles in the 1970's entitled "Thermostats, Lemons and other Families of Models,"
Groups need a focal point, a size or number, which when reached makes it more obvious to join rather than to stay on the sidelines.
Groupon provides, in a rudimentary manner, this focal point.
What effect has this had on QSR operators, like Pizza franchises? Jennifer Litz, writing at Pizza Market Place while initially skeptical, says that customer acquisition costs are lower with Groupon than direct mail.
"Like many skyward-rocketing Internet-based platforms, Groupon has a dubious reputation.
On one hand, it's lauded as a business-saver that could bring in thousands of customers in a day.
On the other, many business owners claim the dirt-cheap joint promotions don't make them any money after Groupon takes its cut.
Moreover, there can be so many uptakes on an offer that stores can barely offer the quality of customer service that will retain new customers...
"I think we ended up paying 4 cents per impression," he said. "The cost per customer acquired was $4.95 per Groupon (coupon). With e-mail marketing it's about $25; direct mail, $8.23. The average restaurant, according to MerchantCircle.com, says a restaurant will pay $38.75 for new customers."
"Gallup recently reported on the nation's new normal spending patterns. According to the findings on February 25, a majority of Americans are spending less than they have in the past, with 62 percent enjoying saving more than spending.
This points to a long and slow recovery.
Fast-casual operators, however, can still thrive in this environment by focusing on the long-term future of their brands instead of the quick dollar.
First of all, it is my firm belief that those of us in fast casual should avoid long-term discounting.
I am perfectly happy to let quick service, casual dining, and fine dining fight it out using these tactics, since they'll be reminding consumers why fast-casual restaurants have such a compelling value proposition."
So is gaining a critical mass of transient customers who have shown no loyalty a good business model?
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