Savvy pizza operators unlock Groupon's potential

May 3, 2010
Like many skyward-rocketing Internet-based platforms, Groupon has a dubious reputation. On one hand, it's lauded as a business-saver that could bring in thousands of customers in a day. On the other, many business owners claim the dirt-cheap joint promotions don't make them any money after Groupon takes its cut. Moreover, there can be so many uptakes on an offer that stores can barely offer the quality of customer service that will retain new customers.
Luckily, some forward-thinking pizza chain owners seem to have cracked the code on making the most of the communal initiative. Pizza Fusion owner Vaughan Lazar has done the cost benefit analysis of Groupon as a new customer acquisition tool. He believes he paid a lot less to reach customers with it than he would have with print or e-mail marketing.
"I think we ended up paying 4 cents per impression," he said. "The cost per customer acquired was $4.95 per Groupon (coupon). With e-mail marketing it's about $25; direct mail, $8.23. The average restaurant, according to, says a restaurant will pay $38.75 for new customers."
In fact, new customer leads and acquisitions are among the company's biggest selling points to get restaurants to run its deals: Groupon has huge lists of e-mail subscribers specific to each city it serves, and every day exposes them to a new bargain it has struck, along with a profile of the local business involved. Once a minimum number of subscribers opt into the offer, it is set.
It's likely not coincidental that the pizza chains who seem to have had the most success with the medium are also forward-thinking, regularly investing in social media initiatives and opening themselves up to innovative promotions. To get the most out of Groupon, they say, follow these social rules of thumb.
*Service is paramount for deal-holders. Really.
Some restaurants haven't maximized the "good buzz" that can be generated from the massive amounts of Groupon traffic because they either didn't properly prepare for the influx, or their servers provided sub-par care in anticipation of reduced tips. If this is how your restaurant will handle the volume of discounted guests, don't bother participating in the promotion.
"The challenge some merchants report is on the day of the promotion, simply unprecedented traffic to the restaurant website and call volume," said Groupon public relations manager Julie Anne Mossler.
"It's critical that the restaurant is prepared to deal with the volume of new customers, whether that's staffing up on phones, reorganizing their reservation books, etc.," she said.
This can be easier said than done, however. Patxi's Chicago Pizza broke Groupon's record of around 3,400 opt-ins when its Feb. 28 deal sold to 7,009 takers, according to pizzeria owner William Freeman. (Thirty percent of those customers were new to Patxi.)
"It is hard to prepare for something like this no matter how organized you are," said Freeman. "Customer service suffers, so it is a balancing act.  All of our locations are full every night so it is a tough call."
*Get aggressive with your offer to attract the maximum amount of new customers. 
What does that mean for restaurants running promotions? Restaurants work with Groupon to set their discounted offer.  Make sure it's enticing enough to bring more than your dedicated customers. Lazar said their Orlando Pizza Fusion store even offered a $25 for $10 promo – and he's happy they did.
Similarly, Gabe Connell, owner of the Indianapolis-based Hot Box Pizza chain, said he was scared that selling $12 gift certificates for $2.50 via Groupon might not be more than just a price break for existing loyalists. But Connell said the turnout was more a mix of old, lapsed, and new customers.
"For our existing customers, we feel that it's a good way to reward them with a great value," he said. "For new customers, we felt that the offer was attractive enough to encourage trial.  Our job was to impress them with our product and service to ensure that they come back again."
Of course, those new customers may or may not come back unless you …
*Focus on followup.
Pizza Fusion's Lazar said his VP of marketing was prepared for the amount of traffic that Groupon would bring, so she made sure they were prepared to make new customers leave a paper trail.
"Be prepared to capture data that you can follow up with for loyalty programs, e-mail marketing, things like that," Lazar advised.
And don't forget to track the less tangible social media mediums, which help prolong buzz about your restaurant even after the promotion is over. "We had hundreds of tweets and retweets about our Groupon offering that reached thousands of people that may have never even heard of Groupon," said Patxi's Freeman.
But he also has an idea for Groupon version 2.0. "Groupon could make the offering more attractive (to restaurants) if they provided us with that (e-mail) information."

Topics: Marketing

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