Restaurants to Change Daily Deal Strategy

Daily deal sites made a big splash on the national scene a few years ago. By merging the social networking aspect with deep discounts, marketers believed they could connect with more customers and generate more revenue, though they needed the restauranthelp of a deal site company to pull off these promotions. Utpal Dholakia, Rice University, has periodically issued research results on this topic and his latest study shows that restaurants will be proceeding carefully in the daily deal industry.

Nearly 100% of the restaurant operators in this most recent daily deal study are aware of Groupon, an industry operator, and over 90% know about competitor LivingSocial. To date, about 60% of restaurants owners or managers say they have run a daily deal promotion. The results are mixed on whether they will do so again:

  • Likely 36%
  • Unsure 36%
  • Unlikely 28%

To maximize any profit earned from daily deals, restaurants have tweaked their offerings. Most, over 60%, limit the coupons to  one per party. Over 50% require the party to dine-​in. And 25% make certain that the deal does not apply to alcohol sales which are typically high-margin.

Operators noted that 60% of customers using the deal coupons are existing clientele, a statistic which suggests that they are cannibalizing their business. Researchers say that one way to counter the trend is to limit deals to new customers. This study also revealed that operators are underestimating how many clients are likely to recommend a restaurant to a friend as a result of a deal. This is an opportunity for operators to encourage clients to share their enthusiasm on social networks and act as promoters.

These researchers noted that up to 30% of consumers purchase daily deals and for many, restaurant offers are particularly attractive. With this industry still struggling to recover from the steep drop that took place during the recession, creative deal options can help an operator get noticed and subsequent deals can entice diners to return.

[Source: Dholakia, Utpal. Et al. Restaurant Daily Deals. Cornell Hospitality. December 2012. Web. 22 Jan. 2013] 
Kathy Crosett
Kathy is the Vice President of Research for SalesFuel. She holds a Masters in Business Administration from the University of Vermont and oversees a staff of researchers, writers and content providers for SalesFuel. Previously, she was co-​owner of several small businesses in the health care services sector.