The Rib Man's Response To Groupon Bashing

Editor’s note: Carey Friedman is the proud owner of Grandpa Eddie’s BBQ in Richmond, VA. This post is in response to a guest series on TechCrunch taking a critical look at Groupon’s business model.

I’ve been reading a lot of stories on TechCrunch lately coming down hard on Groupon and, like other happy Groupon merchants, wasn’t going to comment because I thought it was a single story with one author’s thoughts. However, after seeing story after story trying to pick apart every single piece of Groupon, I felt it necessary to write about my experience. I’m also hoping that I’m the first BBQ restaurant owner who to write for TechCrunch.

I had tried almost every other form of advertising in the past with varying degrees of success. Then our Groupon sales rep contacted me.  I had heard about similar deals before and had turned down the offers.  However, Groupon offered me something different.  At the time, there were 86,000 people signed up for Richmond’s Groupon list (many more now).  After she explained the details, how everything worked and what to expect, I ran the numbers on the discount and wanted to give it a try. There is no better way to get almost 90,000 unique impressions for so little cost.  We ran our first deal in December of 2010 and sold 1,184 Groupons.

Let me say this loud and clear—for my business Groupon has worked incredibly well. The first deal I ran was $10 for $20 worth of food and drink. I was told to expect nearly a thousand deals sold and was pleasantly surprised that we sold nearly 1,200. Of those 1,200 customers, we found that 70% of them were new customers, a great average right off the bat. Of those 800+ new customers, we have seen more than half of them return. Also, let’s not forget all the people who came into my restaurant in the weeks following the Groupon deal and told me that they saw my business on Groupon, missed the deal, but still came anyway because they wanted to try out a new restaurant. That kind of exposure for a small business is invaluable! We were seen by tens of thousands of potential customers in our area and that didn’t cost a dime!

Now, back to the Groupon customers. We tracked every Groupon redemption on our point of sale (POS) system and found that only a handful (literally five or six), had a ticket total that was under the price of the Groupon ($20). We found that customers, on average, spent at least $12 on top of the price of the Groupon, and that was before they came back and paid full price (most more than once). And this is at a BBQ restaurant!  One consistent factor has been that Groupon customers are much more likely to add an appetizer or dessert to their check, since they know the first $20 only cost them $10.  This has been a wonderful way to not only up the ticket average on the redemption, but also has given the customers a broader taste of our menu.  When they come back without the Groupon, they are more likely to order that extra item again.  Also, I found Groupon customers to be better than the average “coupon” customer. These are people that were interested in trying a new restaurant and open to the idea of coming back. There was only a small percentage of guests who were just looking for a bargain.

Another number that I track, which many other restaurants do not, is what my employees claimed on tips. It gives me a good idea of the overall traffic in my restaurant and how confident my customers are with the economy. From my experiences over the past 29 years in the industry, when the economy is rough, tips are one of the first things to take a hit. During the first quarter of 2011 my employees claimed over $4,000 more in tips than the same period in 2010. This was during the first three months of our redemption period and was by far the highest volume of Groupons.  It is indisputable that Groupon brought the vast majority of these customers to our door.  Groupon customers were some of our best tippers and nearly always, almost without fault, tipped on the total bill, not the discounted check.

One of the best reasons I found to use Groupon is that it’s trackable. Buying a newspaper ad doesn’t allow you to see who’s coming in as a result. With Groupon, you can see your marketing dollars at work and have the chance to convert Groupon customers to regulars, something we’ve done a lot. My employees were thrilled when we ran the deal because we were always busy and that’s a good thing. Our bottom line has been raised significantly and I owe a lot of that to Groupon.

Please don’t dismiss this story as an anomaly. I have recommended Groupon to other small business owners, some of whom have run deals with Groupon and done very well (Havana Connections in Richmond for one). The positive stories are out there in abundance, even though we may not yell as loud or as frequently as others.

Will everyone succeed using Groupon? Probably not. As a business owner, I feel like it’s my responsibility to look at this marketing tool and see if it works for my business. There is no question that it has paid for itself better than any other advertising medium we have ever used.  The Groupon sales reps have been extremely helpful in telling me what to expect and how to prepare as well. For me, and, I suspect many other small business owners, this is a no brainer.  For the money I spent on the discount, not only was I able to get my message out to almost 90,000 separate individuals, but I was easily able to capitalize on this and turn many of the guests into regular customers. Where else can a small business get that kind of marketing access?  The simple answer is nowhere.

I am now running my second Groupon deal, and launched it on the exact day that the first offer expired.  We sold over 2400 Groupons, even more than the first time.