In 2008, right around the time Kogi BBQ hit the streets of Los Angeles, a new word entered the American lexicon: Groupon. Just as the gourmet food truck scene did, Groupon came seemingly out of nowhere and created an entire new industry. Thousands of coupon junkies are now glued to their computers waiting for the next daily deal to show up that they can share with their friends. Groupon is now arguably the fastest growing company in our countries history.
Seth Godin, a marketing philosopher and best-selling author, says that if other people are copying you, you have done something remarkable. By this standard, Groupon is an outstandingly successful company that has over 200 copycats in the United States alone and over 500 worldwide, including a short lived version specific to the mobile food industry, foodtruckdeals.com
Andrew Mason, the founder of Groupon, has created an extremely profitable business model. Groupon sure does know how to make money for themselves.
The big question is, does it or does it not make sense for your food truck to participate in the “daily deals” campaigns?
Let’s take a look at how “daily deals” campaigns work.
You offer a number of gift certificates redeemable at your truck or cart at a significant discount (usually around 50%). The offer is valid only if the target number of certificates sold has been reached. The money your campaign generates is then split between you and the vendor (Groupon or one of their competitors).
An offer like this is designed to bring in a lot of first-time guests who have never heard of and have never visited your restaurant before. Such a campaign can literally put your rolling business on the map.
As usual, the positives come with quite a few negatives.
This type of heavy couponing is going to bring in price-conscious customers. Many food truck owners who have tried the daily-deals style of marketing report that the guests who show up with a coupon in their hand tend not to buy beyond what the coupon offers. Many don’t bother to read the terms and try to combine the coupon with other deals or discounts you may have going on that day.
During our research, we found that several truck owners commented that these guests tend to not to tip and are on a lookout for a “gotcha” even though you offer the same food and level of service as you do to non-coupon guests. The worst part is that few of these guests end up frequenting their truck again.
When you plan a marketing campaign around a daily deal, you have to be prepared. Yes it’s nice to have a lot of new guests discover your food truck for the first time. You, however, need to make sure you know how to make money and how to bring these people back after their first visit.
Train your staff on how to work with coupon holders. Add first-time guests to your newsletter, VIP club, birthday club or other type of customer loyalty program you may have in place. Teach your staff how to capture guests’ contact details before they leave the service window.
Offer Groupon deals only on days and hours when your truck is typically slow is slow and only on the items that offer you a high profit margin. A food truck’s food cost may range 28 to 36% of your menu price. Given that you only get 25% of the value from Groupon, you are almost guaranteed to lose money on this marketing campaign, even if some of the coupons do not get redeemed.
An important item to remember is that each coupon customer walking up to your truck puts you further in the red unless you do something to drive more add-on and repeat sales.
We hope this article helps you better understand how Groupon works, and if it is a marketing promotion that will work for your mobile business.