1. Groupon deals aren't only valid for one day, thus the restaurant owner has no idea when people are going to be in the restaurant or not.
2. I reject the notion that I restaurant owner would prefer to serve a full restaurant at half price over a half full restaurant at full price. From my discussions with businesses who use Groupon, they mostly see it as a tool to drive repeat customers not one-time customer volume. Very few restaurants can make ANY money at 50% menu price, much less at 25% menu price (after Groupon takes their cut).
3. I would be willing to bet the 'tipping point' effect of Groupon on the sharing of deals is nearly insignificant. I think a far larger driver of sharing these deals are deals that require multiple individuals to participate. (e.g. I bought a coupon with 15 of my friends to go paintballing in a few weeks)
There are problems with this strategy too. No matter how hard he tries to isolate his target audience, the owner can't really control how many people show up. Or, the numbers might turn out such that (conventional) advertising is too expensive.
I call BS on this. I have ran into many store owners(though they are rare) who have been having similar success as Groupon for years simply by giving a good damn offer in the paper. I have ran into even more who consistently have crappy coupons and get crappy results. I find very, very few who try a groupon-like offer in the paper and don't see results.
This article is typical keyboard-jockey analysis from some supposed expert.
The mechanism has some superficial similarity to 'Assurance Contracts', an economic idea for coordinating group actions that are best done all-or-nothing. However, it seems that at least now, with Groupon in its galloping stride, there's no real doubt most promotions will hit their target participation level. That is, it's more a promotional mechanism for focusing consumer attention, rather than a solution for a coordinated-decisionmaking problem.
There's room for other innovations in these areas, as well. The 'dominant assurance contract' gives an extra sweetener back to pledgers if the threshold isn't met, to make assurance contracts work for otherwise nonexcludable 'public' goods where bystanders might normally hope to free-ride after others fund. See:
Agreed, the Evan Miller piece is far more thoughtful than the OP. Still, it doesn't consider that many groupon deals are un-, not barely-, profitable for the business owner.
For example: http://posiescafe.com/wp/?p=316 The deal was $6 for $13 worth of merchandise, but after Groupon's take, she gets to keep $3. No way to cover costs with a deal like that.. never mind profit.
And if the deal is unprofitable, there's no way to economically justify the offering unless you start factoring in soft effects like return visiters, name recognition, etc.
Indeed, there must be other effects, perhaps more important than the 'golden football' zone, that explain these loss-leader deals.
Almost any business should be willing to lose a little on product if that loss displaces more in other promotion/customer-acquisition costs. A business would be more willing to do so if they're sure the cost is reaching new customers. Perhaps that's an important part of the Groupon secret sauce -- the purchase of the 'coupon' with credit cards that provide a relatively strong identity signal. That could be used -- eventually, at least -- to target future promotions to unique new customers.
Does anyone know what sort of data the business gets from Groupon? Have any businesses offered repeat Groupons that aren't available to people who bought the first one?
> Does anyone know what sort of data the business gets from Groupon?
The only customer data Groupon shares with the merchant is first and last name.
> Have any businesses offered repeat Groupons that aren't available to people who bought the first one?
Highly unlikely. Imposing a conditional like that would complicate Groupon's process and confuse many users.
You mentioned identification by credit card number... Problems I see in that scenario: PCI compliance, UX, lower revenue per deal. And since many people have more than one credit card there is a loophole.
Anything from mises.org is pretty much going to be a partisan piece trying to sell you on their point of view. That doesn't mean it's necessarily wrong, just not a place that's ever going to contradict itself or point to evidence that they don't hold all the answers.
1. Groupon deals aren't only valid for one day, thus the restaurant owner has no idea when people are going to be in the restaurant or not.
2. I reject the notion that I restaurant owner would prefer to serve a full restaurant at half price over a half full restaurant at full price. From my discussions with businesses who use Groupon, they mostly see it as a tool to drive repeat customers not one-time customer volume. Very few restaurants can make ANY money at 50% menu price, much less at 25% menu price (after Groupon takes their cut).
3. I would be willing to bet the 'tipping point' effect of Groupon on the sharing of deals is nearly insignificant. I think a far larger driver of sharing these deals are deals that require multiple individuals to participate. (e.g. I bought a coupon with 15 of my friends to go paintballing in a few weeks)