CHR

Hospitality Leadership Through Learning
CHR

Restaurant Daily Deals: The Operator Experience

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Vol 12 No 16
By: Joyce Wu, Sheryl E. Kimes Ph.D., and Utpal Dholakia Ph.D.

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Executive Summary:

A survey of 273 restaurateurs who have offered daily deals presents a mixed picture regarding the deals’ success and the operators’ attitudes on past and future deals. About half of the restaurateurs, a substantial majority of which were independents, had offered at least one deal, most of them through Groupon or LivingSocial. These operators reported that about 40 percent of the deal purchasers were new customers, meaning that there was substantial cannibalization of existing customers. However, 35 percent of the first-time deal customers returned to the restaurant without a further incentive. Although many restaurant operators said revenues increased, the number that said they made money on the deal was about the same as those who reported losing money. Additionally, a comparison of deal buyers’ attitudes with the restaurateurs’ view of the deal buyers found that the operators misjudged their guests in some regards but were correct on others. The operators underestimated deal buyers’ likelihood of returning to the restaurant without a subsequent deal, and missed a key characteristic of the deal buyers, which is that they want to be opinion leaders, or “market mavens.” This aspect of deal buyers can be important for future sales. Given the consumers’ attitudes, the best strategy to bring back deal buyers is to offer them a first-class experience so that they can see a restaurant’s full value proposition.

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