Skip to main content

The Groupon Effect

Last week this headline caught my attention: "Pizzeria Eschews Groupon, Offers Own Half-Off Deal". The article is about a gourmet pizzeria in Arlington that will offer half-price pies every Monday... all you have to do is walk in and ask for the deal.

(from afagen on Flickr)

There's nothing novel about businesses offering discounts on slow days. These discounts have been around for as long as there's been commerce. Groupon and it's endless copycats have been around for about 2 or so years, and already we've forgotten about what life used to be like before they existed.

When I was in college, I ate 40-cent wings every Monday. That's more than 50% off the menu price, and no coupon required, just come on any Monday after 3pm and order them. This bar also had specials on Tuesday, Wednesday and Thursday. Half-price pizzas, steak dinner for under 10 bucks, and 5-dollar burgers. It was designed to bring people in during the slowest part of the week, and from what I could gather, it seemed to work pretty well.

What Groupon effectively changed was a few things.
  1. Removed blackout dates from discounts
  2. Applied discounts to the entire menu
  3. Offered a one-time email blast advertisement to a huge mailing list of people
The first two benefits don't necessarily help businesses. A restaurant that's expecting a full house on Saturday night doesn't want a bunch of people coming in and redeeming Groupons. They want them in on a Wednesday evening when there are seats to fill. Similarly, bars sell half-price wings and burgers as a loss leader, knowing that people will still order drinks, the real money-maker. When Groupons apply to drinks, it really distorts that logic.

I'm not sure how anyone can be surprised that businesses are going back and doing what they've always done. Groupon seemed like a good idea, and like I've written before, is probably dying a slow death. Everybody wanted to try it at least once. And those businesses that didn't like it will probably never do it again.

That said, I do find the "Instant Deal" technology that LivingSocial rolled out a few months ago to be pretty interesting. Unlike the daily deals, the instant deals can be used as a sort of "revenue management" tool for businesses. If a restaurant has empty seats to fill, the manager can log into an account and run an instant deal. If the place is packed, they don't need to offer anything. If there's a reason to think these websites will continue to thrive, I expect it to be the result of these instant deals.


jamesinclair said…
The assumption here is that Groupon is "dying" because the model may not be optimal for restaurants. Except that restaurants are just a small portion of the economy. Many businesses lack "rushes"that restaurants have, like bike shops, dentists, salons etc etc

Popular posts from this blog

In Praise of Southwest's 'C' Boarding Group

A few weeks ago I saw a tweet from someone complaining that their Southwest Airlines boarding pass had been assigned A20 (meaning they would be at least one of the first twenty passengers to board the plane). Apparently this person though they should have been assigned a higher number, less their flight experience be considerably spoiled.

Despite the complaints, Southwest has resisted demands to assign seats on its flights, a decision which I personally applaud. I'll admit that I was skeptical when they rolled out the newest boarding procedure, assigning both boarding groups and a line number; but in hindsight it seems like one of the best operational decisions they've ever made. If nothing else, it effectively eliminated the infamous "cattle call" whereby fliers were getting to airports hours in advance and sitting in line on the floor as if they were waiting for the midnight showing of the new Star Wars movie.

When I was an intern at Southwest Airlines last winter, I…

So You Want to be a Southwest Airlines Intern?

My personal website must have pretty decent SEO - because in the past year, I've received about two dozen emails from aspiring Southwest Airlines interns looking to draw on my experience in search of their own dream internship. In the past two weeks alone a few new emails have already started rolling in...

(from flickr user San Diego Shooter)

If you've found your way here, you might be hoping for the silver bullet; a secret tip that will propel you above the competition. Unfortunately, I do not know any inside secrets. I can only share my experience as an internship candidate about two years ago and, rather than responding individually to future emails I anticipate to receive, I hope that potential interns will find the information posted here valuable.

Understand: Southwest Airlines is a very unique company. The corporate culture at Southwest is truly unlike that of nearly every other company. But you probably already knew that, since it now seems mandatory for every management,…

Mixing Sports and Business

In the last two days I've devoured every article in the Washington Post about the Nationals painful and epic defeat on Friday night in the NLDS. It was a tough way to see the season end, there's no doubt about that.

(from wallyg on Flickr)
These articles make it clear that there are a lot of people emotionally invested in professional sports. I think they sometimes they forget that, ultimately, Major League Baseball is big business. Each team is a major corporation and the league itself is an organization governed by a bunch of executives. The television networks that show the games are under contract with the team owners and the games aren't usually available to those without cable.

This is why it can be so hard to be a fan in this game. It's the multi-millionaire and billionaire owners that call most of the shots. They get to decide how much they're willing to spend on players. They get to decide who to hire as the CEO of the company. They get to decide how much t…