Daily deals and group buying dominate much of the debate in restaurant marketing circles these days. 


Many operators dismiss such offers, arguing that they serve only to attract a fickle, discount-seeking customer who winds up costing them money.


But others maintain that while such programs are by no means a necessity, there are ways that restaurateurs can benefit from the increasingly popular couponing trend offered by such firms as Groupon and LivingSocial and, in the near future, Facebook and Google. 


Proponents point out that with better targeting, tie-ins linked to loyalty programs and strategies for converting one-timers into regulars, restaurateurs can make such daily-deal programs work for their businesses.


Al Bhakta, chief executive of 60-plus-unit stir-fry chain Genghis Grill, said his chain’s daily deal with Groupon resulted in one-time visits from deal seekers and several discounted meals for loyal guests.


“We saw a lot of our regular customers buying three or four of the Groupon vouchers, 
so we cannibalized some existing sales,” Bhakta said. “Those [others who] signed up for LivingSocial, Groupon and others weren’t going to be loyal anyway. 


“But it also introduced us to a lot of new folks, as well,” he added.


Genghis tested out a half-off Groupon offer last year at three lower-volume corporate stores in Dallas. Of the 4,000 vouchers it sold in a few hours, 3,200 were redeemed.


Restaurants don’t necessarily have to live with daily deals or account for their popularity when creating a brand’s value proposition, Bhakta said, noting that discounting becomes less crucial to a chain delivering on food quality, service and loyalty marketing.


“Inherently, restaurant folks are going to fight back, so I don’t feel [group buying] is a necessity,” he said. “The financial model still isn’t in favor of the merchant.”



Recouping losses


Fred LeFranc, founding partner of Results Thru Strategy, agrees that selling 30-percent- to 50-percent-off group coupons can lose restaurants a lot of money. But he said it’s possible to recoup that hit if the operator keeps an eye on the long term. 


“The effective use of this is to have a strategy for converting people into regulars,” LeFranc said. “Have a meeting with your entire team and explain the hit you’ll take as a business, and have them treat these people as full-price customers.”


A report published this year from Chicago-based research firm Technomic found that daily-deal customers have the potential to become loyal, paying customers. Of restaurant-goers who had used a group-buying coupon, two-thirds told Technomic they later returned to the same restaurant without being given a discount. Another 83 percent recommended that eatery to a friend or family member. The coupons also spurred trial. Forty-eight percent of respondents used them at restaurants they had never visited, and 25 percent redeemed them at restaurants they’d only been to once.


LeFranc suggested that operators follow up with a way to enroll guests in an e-mail or text marketing club or to self-promote on Facebook and Twitter. Further, the restaurant could offer another bounce-back deal to group-buying customers.


“The bounce back is less cost to you, but there’s still an incentive that helps you recoup some of the money you gave away,” he said. “It also gives them a second experience where you can try to capture their information again.”


If restaurants can reward coupon customers after “bribing” them to come in with the group-buying promotion, LeFranc said, they stand a better chance of converting those guests into regulars.


Picking their spots


Some restaurants, however, are content to bring in one-time deal seekers as long as that traffic can be limited to off-peak periods when it’s needed. Operators have used several smaller, localized startups to offer only certain fixed-price meals or to tie a small number of aggressive discounts to reservations on off-nights. But now group buying’s biggest player is trying to get just as nimble.


Groupon Now is designed to fill seats when operators need them by offering only a handful of deals for those few tables that seem always to be empty or by driving people in on weeknights, said Dan Roarty, vice president of Groupon Now.


“Traditional Groupons are designed for when a merchant needs a big boost,” Roarty said. “Maybe they’re new and need exposure, or they’re seasonal and could use some customers, or they have a new product they want to feature.”


He added that Groupon Now, currently in 25 markets, enables operators to make an offer for certain items if they’re overstocked and need to pare down inventory.


“If you’re doing fine on Saturday and Friday and don’t need the help, it has more control on the dial [for off-peak times],” he said.


Qdoba Mexican Grill has tried both forms of Groupon, said Lauren Preston, the nearly-500-unit chain’s nontraditional-marketing and public-relations supervisor. The brand’s 20 corporate units in Chicago were a test case for Groupon Now’s Chicago launch early this year, and Qdoba saw so much success that it tried the traditional Groupon in late July. As with the Groupon Now deal, the featured offer sold out in a matter of hours, Preston said.


“There’s definitely an advantage to Groupon Now that allows for instantaneous results,” she said. “You can hit a targeted audience at a targeted time. With the featured deal, 20 units may sound like a lot, but in a market like Chicago, it’s not. We were looking for additional brand awareness and some traffic.”


Restaurant chains that don’t require the awareness and traffic spikes associated with daily deals still can make them work if they try to encourage margin-friendly behavior, Preston said. 


For example, Qdoba charged $7 for a Groupon voucher of $14, which is well above the chain’s per-person check average. But by “giving more ‘oomph’” to the offer, it influenced users to bring a friend, who would have to pay some of the bill at full price, she said.


Qdoba also timed its Groupon offers to coincide with its double-points promotion for its loyalty club, which it promoted through in-store signage and employee upselling.


Similarly, 2,600-unit Quiznos nudged group buyers toward its loyalty program with Groupon, offering an eight-sub punch card for $26, roughly half the retail price of $51.92 for eight subs.


Dealing differently


Sometimes, daily-deal platforms are a springboard for promotions that don’t discount.


At Betelnut, an upscale Asian restaurant in San Francisco, management tested an online offer with BlackboardEats but sought to avoid any unflattering perceptions — the “discounting kiss of death,” said general manager Robert Wellbeloved. While the $1 offer of a special menu sold well and appealed to new guests and regulars, one customer brought the BlackboardEats voucher and complained that it wasn’t for the service’s typical 30-percent-off deal.


“The dark side of this is they don’t care about the concept; they just want a discount no matter what,” Wellbeloved said. “We don’t want people coming in like that. We want to create the long-term investment.”


Betelnut’s offer charged $1 for a code that could be redeemed for a special, secret menu.


“We were able to craft items that were more exciting and … could take care of our foodies that wanted something new and to have the excitement of getting something for basically nothing,” he said. “We sold 1,200 key codes in four hours and had a retrieval rate of 10 percent to 15 percent, which is pretty much consistent with this sort of thing.”


Betelnut may consider more substantial group deals in the future, Wellbeloved said, but he’s not feeling pressured to do so.


“There is a perception that it’s necessary to do [daily deals], but I think the people that are successful in this business keep the product fresh, manage well and have good employees,” he said. “Ultimately, the economy will change, and those three things will dictate who ends up at the top of the pack.” 


Contact Mark Brandau at mark.brandau@penton.com.