How to Avoid a Groupon Restaurant Disaster

How to Avoid a Groupon Disaster

Some retailers have found countless new customers by using Groupon. Others have nearly gone out of business. So what’s the best way to prepare for a “deal of the day”?

(Related Article By OnSite Consulting – Groupon, Opentable : Coupons Can Kill Restaurants – If you are considering a Groupon/OpenTable/Yelp or many of the other coupon providers as a method to increase short term volume, please contact us today to learn how we can provide the same results without the net loss per customer)

While Groupon continues to generate plenty of buzz, especially with rumors swirling about a potential $6 billion acquisition by Google, the popular deal-of-the-day site does occasionally find itself the recipient of bad PR — notably, from small retailers who nearly lost their shirts using the service.

To be sure, many small businesses have had huge sales days and an influx of new customers, thanks to Groupon. “We’ve used a few other sites and no one even compares to the amount of sales we received when using Groupon,” says Morgan Cullen, director of PR and marketing for Esther’s Follies, a magic and comedy troupe in Austin, Texas. “They have every little step of the process laid out and it’s very organized for their clients.”

But not every business owner’s Groupon experience is Utopian. Maybe they lost money. Or they didn’t get as many customers as they thought they would. Or they had too many customers and were overwhelmed. Consider Jessie Burke, the owner of Posies Cafe in Portland, Ore., who in September 2010 shared on her company’s blog that working with Groupon “has been the single worst decision I have ever made as a business owner.”

So how do you effectively navigate the Groupon waters? Here are some tips for structuring your next deal.

Don’t do Groupon when you’re broke.
Have cash on hand — and plenty of it. That seems to have been Burke’s problem. She wrote that at one point, after spending $8,000 in inventory on customers who came in with their Groupons, she had to take $8,000 out of her personal savings to cover payroll and rent.

When you’re giving customers products for half off, you may wind up losing money — a fact that’s easy to miss when you fall sway to the Groupon hype. After all, nobody offers a Groupon to the public with the idea of losing money. Every business owner’s hope, of course, is that either patrons wind up spending far more than they planned on that first visit or turn into repeat customers. But losing money in the short term is a very real possibility.

“You must look at Groupon as part of a marketing strategy,” advises James Sinclair, CEO of OnSite Consulting. “If you don’t have money for marketing, then how do you intend to cover the net loss per customer in the short term? Just because you get to delay and space out the loss as customers redeem their coupon, you still need those reserves.”

If you want repeat customers, focus on customer service.
You have to know why you’re utilizing Groupon. Do you want to build a business of repeat customers, or are you looking for a lot of exposure and a big sales day? Christian Hahn is a cosmetic dentist in Louisville, Ky., and was one of the first in that market to offer a Groupon. He provided a Groupon for a “new patient exam, cleaning and X-rays” and was, like many business owners, thrilled with all the new customers coming in. But he didn’t just want new one-time-only customers. He was looking to build a base of repeat customers.

“One thing I wish I had known going into this is that [I would] need to create a special schedule for Groupon patients,” Hahn says. “They need to be wowed to want to come back, as they mostly look for a bargain. You don’t want them to get their Groupon and move on. So giving the staff the ability to provide ‘wow service’ is critical.”

Understand that Groupon writes the clever copy — you don’t.
Tracy True Dismukes, owner of Consignment Chic and Collage Designer Consignment, both based out of Birmingham, Ala., was frustrated that Groupon “writes the copy and the business owner can’t change anything but the facts.” Moreover, “We didn’t get to see ours until the day before our Groupon hit, and I forbade them to use that copy,” Dismukes says. “For 18 years, we’ve fought against the secondhand and thrift images of our business — we’re high-end ladies’ consignment — and Groupon’s offer used ‘secondhandin the headline and repeated it again five more times in the first three lines, trying to be cute. It wasn’t.” She convinced Groupon to change the copy, but the replacement prose “was pretty lackluster, and we just had to take what we got.”

Still, Dismukes acknowledges that it was a good experience overall. “On the positive side, we definitely have new customers,” she says. “After 18 years of TV, radio, print advertising and lots of PR and local TV appearances, Groupon found us new folks painlessly in just one day with no cash outlay.”

Check your contract.
That’s good advice for any contract you sign, but Deb Leopold, owner of First Class Lifelong Learning Center, in Washington, D.C., tried Groupon and would “absolutely” do it again. But she does advise, “Check and re-check your contract. The contract that I was e-mailed varied significantly from the agreed-upon terms during the phone conversation with my sales rep. The good news: It was all corrected efficiently and expediently.”

But one reason to check that contract: Once everything is signed, Groupon won’t renegotiate, reports Tiffany Sellwood, who works at a family-owned-and-operated florist, Cactus Flower, with numerous stores through the Phoenix area. She signed an agreement to be a “side deal” with Groupon back in June and then finally in September, was told the business would be featured in a couple of weeks. After scrambling to ensure that staffing was in place to handle the new orders, Groupon made a last-minute change and decided to feature the business two days later than it initially said. Sellwood asked if she could renegotiate the revenue share “since we had been given the runaround and since we’d now be paying out staff overtime,” she says. “Nope. Groupon does not renegotiate.”

But, after all that and completely expecting her Groupon experience to pretty much destroy her career at Cactus Flower, to Sellwood’s delight, “The day went smoothly. The calls were manageable, we didn’t have any angry or confused customers and the redemptions have not yet overwhelmed us. It ended up working out really well.”

Be ready for an onslaught of customers.
As Sinclair puts it, “You cannot fault a company for offering you thousands of targeted, smoking-hot leads through your doors.” Indeed, you might find yourself on the receiving end of thousands of new customers. “It will hit harder than expected,” Sinclair says. “Train your staff to understand the benefits and what is required in serving a coupon customer.”

Leopold agrees. She runs her learning center by herself, and so she stayed at her computer for 36 hours following her Groupon promo, answering all the e-mails that came through, from people either making purchases or asking about various classes. “Normally, I have about 18 to 21 e-mails in the morning,” Leopold says, but on the day of her Groupon, “I woke up to 192 e-mails. As fast as I was making my way through them and knocking off five or six e-mails, 10 more would pop up every five minutes.”

In other words, expect the Groupon experience to go perfectly, and you’ll likely set yourself up for some disappointment. But if you plan for a hectic, crazy day and expect a few bumps in the road, you just may walk away thinking that everything did go perfectly.

Geoff Williams is a frequent contributor to AOL Small Business. He is also the co-author of the book Living Well with Bad Credit.


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