A study of restaurant consumers who use group or daily-deal websites, released last week by Rice University and Cornell University researchers, indicates that while deep discount offers may cause sales cannibalization, they also bring in new guests with positive attributes.
The study, "Customer Response to Restaurant Daily Deals," by professors Utpal M. Dholakia of Rice and Sheryl E. Kimes of Cornell, stemmed from an August survey of 931 completed consumer responses. A quota sample was used that insured that about two-thirds of the sample had purchased a restaurant daily deal and one third had not, the authors said.
An affiliated report also released by Dholakia and Kimes last week indicated that the typically steep rate of discounting found at deal websites — 40 percent to 50 percent — may give away more than necessary to attract new guests or increase visit frequency among others.
"Based on our results, it seems daily deals help generate new customers who are satisfied with their experience, likely to return to the restaurant and likely to recommend it to their friends," they wrote in the report. "We also found that some cannibalization of existing customers may be occurring, that daily deal users were not necessarily 'cheap,' were likely to tip on the full amount of the bill [before discount] and were no less loyal than non-users."
The researchers also noted the potential of deal users to influence others.
"Market mavens are people who like to provide market price and shopping information to their friends,” they said. “Daily-deal users were significantly more likely to be a market maven than non-users.
“Daily-deal users tend to be more impulsive buyers, which indicates that there may be some opportunities for successful suggestive selling when they are in the restaurant," they added.
The Rice–Cornell study comes at a time when many restaurant companies are weighing the pros and cons of group or daily-deal sites, such as Groupon, LivingSocial, Restaurant.com and EverSave. The research touched on several points raised in such debates, which include that while deal sites may bring in traffic and increase restaurant trial, they may also steal sales from existing customers, crowd out full-price paying guests, harm margins or tarnish the overall reputation of a restaurant offering a deal.
Comments
Post a CommentDeals and coupons don't work..they hurt
They might drive new customers, but what kind of customers? Ones that go just for the deal, then move on to the next deal? Extreme price-sensitive guests who won't return when the meal jumps 50%?
And what does the deal do to long term brand integrity? If you discount your food with coupons or %off, you devalue your food and your brand.
It's time to go back to a balanced and sustainable marketing plan for new and existing restaurants.
Tom Kelley
Concept Branding Group
San Diego
Deals and coupons don't work..they hurt
I completely agree with Tom. I would vehemently disagree with every positive opinion asserted in this paper that deals and coupons work. They also kill any attempt at creating any meaningfully differentiated value for the business.
One of the biggest complaints from real operators across the country is the consistent issue of less tipping than is usual on a typical bill with no deals or discounts. The fact of the matter is that this has always been a problem with operators who utilize deep discounts.
The bottom line is that if you use deals and discounts to get new guests, you'll have to use them to keep them. This is nothing but a race to the bottom.
Jeffrey Summers
Summers Hospitality Group