The New Craze: Groupon vs. Livingsocial – is it for you?

 

Every morning after my coffee and news, I’m on my phone browsing through the “deals of the day” from local restaurants. My wife and I enjoy trying new restaurants, but after being an owner and knowing the profit margins, it’s tough forking out the dough to someone else.  Enter Groupon.com and Livingsocial.com – these guys have me hooked.  I crave a good discount and when most restaurants offer 50% off vouchers, you better believe I’m going to check these apps once a day.

For the area I live in Livingsocial is more prevalent and I recently purchased 2 of the daily deals from them.  I bought a deal from a Mexican restaurant for $15 that gave me $30 to spend as well as a deal from an upscale Italian place that cost $20 to get $40.  My total bill at the Mexican bill was $77 plus tip and the bill at the Italian joint was $51 plus tip.  In both cases the owners got more out of me than the initial deal.   I felt like a sucker for a second, but I enjoyed two great meals so I quickly got over it.  In the end, the daily deal worked for the owner and for me, so no complaints.     

So let’s evaluate whether or not Groupon or Livingsocial is something you should take advantage of for your establishment…

First off, let’s go over the cons: not every customer spends over the amount of the voucher.  The majority of customers spend the amount on the voucher or slightly over.  Also, customers may send items back or take up tables on a busy night causing your profits to dwindle. And if you don’t keep track of voucher numbers, customers may reprint vouchers and reuse them at your expense.     

Now on the upside, you get new people through the door that you couldn’t get before – a golden ticket.  You get a chance to make them a customer for life if they enjoy your establishment and service.  Having a full restaurant is always a good thing, and some people will spend over the voucher amount.  Plus, the whole time you can look like a trendy marketing genius.

Offering a discount like this one week out of the year is plenty.   So which company do you choose?  Let’s over the numbers – they never lie. 

Groupon has a 50/50 spilt and a $2.50 credit card fee per transaction.

Livingsocial has a 60/40 spilt with no credit card fees.

If we use a 50% coupon on a $100 bill, Groupon leaves us with $22.50 in our pocket and Livingsocial, $30.00.  If we assume a 33% average food cost, we would be in the hole $3 with Livingsocial and $7.50 with Groupon, before anybody even walked in the door. 

If you want to give this marketing tool a shot - which I strongly recommend - Livingsocial is our winner.  With Livingsocial you save $7.50 over Groupon on a $100 voucher (not to mention they have a cooler app in my opinion).   It’s definitely worth trying once, so get marketing!