Mado does Groupon right (I think)
There's been a lot of conversation in Chicago lately about Groupon's business model--how sustainable it is, and how good or bad it might be for businesses to get involved, especially restaurants. I've done some thinking about it myself, and concluded there may be a real sweet spot for businesses with a great product/service to offer--which the highly regarded Mado exemplifies in its Groupon deal today of "$20 for $40 worth of farm-to-table cuisine."
Before I get into what that sweet spot is for businesses doing a Groupon, some disclosures: I've purchased and enjoyed several Groupons and given them as gifts to my wife; I do not like the idea of restaurant coupons in general, because servers seem to hate them and it can make you look like a real cheapskate when you're taking someone out, but it seems as if Groupon, by being a hip company, has actually made it more socially acceptable to use them; TOC's circulation department has participated in a couple of Groupons; and our site has a standard affiliate agreement with Groupon--click through to the daily deal from our site and we get a taste if you purchase, much like similar arrangements we're all familiar with on Amazon, etc.
So what's the sweet spot for Groupon? I think it's something like this: Especially for a high-end, chef-driven restaurant, you offer a half-off deal at a low dollar amount. Why? Because at a high-ticket place, you're going to easily spend $100 on dinner for two. So if the restaurant gets roughly half the Groupon amount, say $10 in the case of the Mado deal, it's taking about a 30 percent hit on the retail price of the food and beverage (and diners end up with 20 percent off the check if they spend $100). Even better for the restaurant would be $15 for $30 or $10 for $20, which means they'd take an effective hit of about 22.5 percent and 15 percent on the retail food price, respectively, assuming diners rack up that $100 check. In those cases, a restaurant may be able to turn a profit on the Groupon redemptions themselves instead of having to count on repeat business. Meanwhile, diners get that extra little nudge to indulge in a splurge meal, and everyone wins, assuming the business has the base staffing in place to keep the increased volume of customers happy. (If the restaurant sets it up so that there's a reasonable chance the Groupon redemption itself would at least break even, there's a good argument for extending the expiration date fairly far into the future to lessen the chance of a stampede of Groupon-waving diners in the first week. And if staffing is still a big concern, capping the number of offers available probably makes a lot of sense, too.)
I've purchased Groupons like this and feel like I'm not screwing over the business when I do. The same holds true for Groupons for admission or membership to cultural institutions that are open anyway and want to churn some traffic and create new loyal customers who check the place out at a reduced rate (I bought the recent 10-admission Groupon deal to Chicago Children's Museum, for instance, and I'm sure the museum will more than make up for the discount after we pass through the gift shop).
What do you all think? As consumers and businesses, what's your ideal Groupon experience? And restaurant owners: Am I off on where the sweet spot is? In other words, are your retail menu prices giving you such a narrow margin that a Mado-type deal would not enable you to break even (and if so, do you still see it as potentially a good marketing investment)? I'm interested in moving past the binary Groupon good for business -- Groupon bad for business arguments and seeing where it makes the most sense. Meanwhile, there just might be a dinner at Mado in my future...