Marketing is one of my favorite parts of running our business – a close second to face-to-face interactions with our guests at the teahouse (which I love). It’s the part in which I get to be creative and have the opportunity to bring in business, but realistically, I just don’t have the luxury anymore to http://www.flickr.com/photos/mccaffry/2322099396/focus as much on marketing as I’d like. Aside from traditional marketing venues such as events, social media, and advertising, I’d like to explore some of the newer ways to spread the good news of tea. Hopefully, if you own a tea store or cafe, you’ll share some of your experiences with us. As a consumer of tea and tearoom / teahouse experiences, I’m also curious to know what speaks to you.

In this post, I’d like to focus on Groupon. Last year, we participated in a Groupon campaign when it was fairly new to the area. By now, most of you have heard of Groupon, but in late 2009 / early 2010, the concept was fairly nascent in this area. I liked the sales rep who asked us to participate, and agreed to launch a campaign in April last year. If you’ve never launched a Groupon or other similar campaign, I’d like to share some of our experiences using this type of marketing tool:

Pros

  1. Groupon has a wide reach, having lists upwards of 100,000 or more in some areas (probably more by now). Your product will be featured exclusively with links and a rather colorful description to this mailing list for an entire day.
  2. The exposure could deliver potential new customers to your door, giving you the opportunity to turn that initial visit into repeat visits.

Cons

  1. Expensive: Groupon asks that you discount your product by at least half, and they take half of what is purchased from you. You get the remaining 25% of that product sale, which, if you’re familiar with the razor-thin margins in the restaurant / service / cafe industry, results in an actual cost to you. Put another way, you’re giving away 75% of your revenue to run this campaign, and you have to ascertain if this cost could be better invested elsewhere (say in an underwriting campaign on public radio).
  2. Brand / product devaluation: Mass couponing higher-end, premium products could devalue your product and consequently your brand. This could potentially dilute the equity you’ve built into your brand over the years. Think about certain retailers you frequent only when they have big sales – would you ever buy anything full price from them when they’re constantly advertising “biggest sale of the year” each week?
  3. Uncertain target: Are Groupon users potential repeat customers, or just bargain hunters looking for a one-time deal? Remembering that each customer is costly to bring in the door, the success of your campaign lies in repeat, quality visits and new loyal guests / friends of your business. At the time we ran the Groupon campaign, there were no tools to track repeat visits, although we frequently ask new friends how they learn about us. We have had a few people say they met us through Groupon, but not many.
  4. Rush to redemption on expiration date: If you’re a cafe, beware of booking close to the expiration date of the Groupon. Don’t make your expiration date on your busiest day, as everyone will want to redeem on or around this last day. Our expiration date was on a Saturday in October, just as business was picking up again. Everyone wanted to redeem their Groupons that day, which resulted in a full cafe of Groupons all day, barely room for regulars, and demoralized servers (Groupon users rarely tip on the full pre-discounted price).

Lessons Learned

I am glad we tried Groupon, despite it being an expensive experience. Discounting to this extent was a fairly new marketing tool to us, and I was unable to foresee certain scenarios that hurt us, such as timing of the campaign, caps, expiration date, structure of product discounting, limits of the offer, and so on. I was happy to reward our current, loyal guests with Groupon discounts, but overall many Groupon users didn’t tip, demoralizing the staff, and it remains to be seen how many have resulted in repeat visits. My hope was that the Groupon would encourage folks to visit during the summer, but it didn’t happen (could’ve been the awful construction we’ve been suffering through now for over a year). Summer was very slow, and few Groupon users redeemed June-August.

What wasn’t measured, or even easy to measure, is the opportunity cost, a cost that should’ve been factored in: how much money was lost in a small dining room packed at peak business hours with only Groupies? During those times, we were turning away full-price customers right and left on busy days … lessons learned, until next time.

This article was originally posted to T Ching in February of 2011.

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