How do groupons work at restaurants

Groupon, founded in , is a website that offers consumers deals and discounts for just about any type of business you can think of, including restaurants, spas, and retail stores. Groupon acts as an advertising platform by allowing businesses to promote deals in the form of vouchers and cashback through linked-credit cards. Groupon started off offering deals in the form of digital vouchers and has more recently started incorporating card-linking, which lets customers receive cashback after using a specific, linked credit card to redeem a Groupon deal.

This allows customers to take advantage of the same deal multiple times. The platform makes it easy for companies to create customized deals and makes them available to their huge user base of 53 million active users worldwide.

Groupon suggests customized recommendations for how big a discount should be, usually between 40 to 90 percent off the full price.

Once a deal goes live, businesses receive their payouts every 30 days. Business looking to list deals on Groupon would do best to think of it as an opportunity to increase traffic and attract new customers rather than a vehicle for increasing revenue right off the bat. Because they do take about half of each purchase, Groupon really makes sense for smaller, local businesses with relatively inexpensive goods or services that could benefit from additional marketing or public awareness.

Some examples might be companies like performance venues, travel agents, or spas. Above: Example of the many categories for local advertising on Groupon. There is no upfront cost to advertise on Groupon.

However, the company takes a share of the revenue earned when its users redeem a coupon through the marketplace. Adding to this, Groupon requires companies to have discounts of a certain percent. This leaves the business with 25 percent of the original sticker price of an item or service. And the business model is clearly extremely easy to emulate, since lots of companies are, many of them offering better deals for the customers, such as getting your coupon free if you recruit three people.

Felix argues that Groupon will benefit from superior targeting capabilities as its network grows, but if it's network and targeting capabilities are so great, how come it just targeted me with a groupon limit 25 for a pool membership in Southwest DC? I live in Northeast. Despite the hype, my subjective experience is that these realities are starting to be reflected in the quality of the deals available on Groupon. Initially, there were a fair number of great deals that I eagerly snapped up.

But I'm buying fewer and fewer these days, because as merchants have gotten savvier about the costs, I'm finding that more and more of the deals aren't very good. Peter and I made the mistake of paying quite a lot of money for a scotch tasting--something I've enjoyed doing in the past--which, through the magic of Groupon, turned out to be an opportunity to stand in lengthy lines in a hotel lobby for the privilege of tasting mostly pretty ordinary bottles from a liquor store's stock.

They'd clearly allocated a very limited number of pricey bottles to a tasting for which they'd sold hundreds of tickets, so they quickly ran out of anything older or more interesting. We did end up buying a couple of interesting blends, but the experience annoyed the hell out of both of us, which has not enamored us of either Groupon, or the liquor store. Take a look at the other deals which are available to me on Groupon today:. The first is a traditional Groupon, but on a low-cost product that makes it barely worth remembering to print out the coupon.

The second--well, I don't recommend them, that's all. But their uptake seems to be pretty small for an online offer. The Lasik is almost certainly a "raise prices and discount" situation--you have no idea what their normal price is. Even so, who wants discount eye surgery?

Good luck with that. The last two are just using Groupon for a very traditional service business model: low-cost services or "consultations" that they use to upsell you more expensive services.

I can get equally good "deals" by going to their website, or finding a copy of the Yellow Pages. But perhaps these deals just aren't targeted to me? Maybe not, but to whom are they targeted? How is Groupon's deal of the day a three month single-person pool membership that only 25 people can buy?

But there are pros and cons for both merchants and customers. Businesses: A business gets free advertising and hopefully new customers in exchange for reducing the price of goods and services. Merchants new to Groupon sometimes structure deals that end up costing a lot of money without getting many new or repeat customers. Some businesses have moved away from working with Groupon and use social media channels in addition to traditional advertising as a way to boost sales without having to give a huge cut of their revenue to Groupon.

Consumers: Groupon deals save you money because you pay less than the full retail price on goods and services. They even offer some student discounts.

In some cases, visiting a merchant and finding out their specials may have saved more money or been more convenient than using a Groupon deal. In , Groupon began offering credit-card-linked deals in addition to their voucher-based system. They can also utilize deals more than once.

After using a specific linked credit card to make a purchase, customers receive cashback. Customers like these offers because they can add a killer deal whenever they like, and as many as they want. But they only pay for the deals they use. Then, they get cash back rather than an up-front discount. Check out the Frequently Asked Questions FAQ document that answers the questions people ask most about these memberships.