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Getting Over Promo FOMO

July 11th, 2017 | Posted by APT in Financial Services | Promotions | Retail - (Comments Off on Getting Over Promo FOMO)

What is “FOMO”? It’s simple: the Fear Of Missing Out. This term has traditionally been used in social settings, for example: “Jane had major FOMO when she was out of town for the summer party, because her whole team attended and it was always fun.”

However, the FOMO epidemic has now spread from social circles to the business world. Many organizations are experiencing FOMO when it comes to optimizing their promotional strategies – or, in other words, suffering from “Promo FOMO.”

Consider an organization that deploys a promotional campaign, first trialing it with a subset of customers to understand its impact. In this common scenario, there is a challenging balance to strike. Executives want to maximize the exposure of the campaign to the most relevant customers to avoid missed profit opportunities. However, the process of using test vs. control analysis to evaluate a campaign requires holding out a group of customers from the campaign in order to have a baseline comparison – meaning that fewer customers are receiving the campaign.

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Do daily deals make sense?

September 10th, 2013 | Posted by CCorman in Pricing | Promotions - (Comments Off on Do daily deals make sense?)

We’ve written in the past about the questionable economics of daily deals for restaurants. However, a recent article in QSR Magazine suggests that some operators are still using Groupon and other daily deal sites to encourage new business at some locations. For example, Smashburger recently launched a $6 for $12 deal, meaning that the Denver-based burger chain will receive $3 for the same food that would have normally garnered $12.

Two things about this promotion are worth noting:

  • First, Smashburger is only running this promotion in areas where they have relatively low brand awareness, so it is likely that the chain is driving more incremental visits in those locations than they would have if they launched the promotion chain-wide.
  • Second, Smashburger notes that customers redeeming the deal come in groups and thus have larger overall checks than those customers not redeeming the coupon. While this statistic is seemingly good news, it is difficult to know whether customers redeeming the deal would have had larger checks anyway.

For restaurants with low brand awareness, daily deals have a chance of being profitable by generating incremental trials that may lead to full-priced future visits. But restaurant chain operators need to test these promotions first to understand if redeemed deals are actually generating incremental trips and larger transactions, or if that behavior would have occurred anyway. Fortunately, Smashburger has an opportunity to do such causal analysis since they have only offered the Groupon in some locations.

The Economics of Daily Deals for Restaurants

December 13th, 2012 | Posted by CCorman in Promotions - (Comments Off on The Economics of Daily Deals for Restaurants)

NRN recently posted an article about the pros and cons of daily deals. The article cites research that reveals “restaurateurs who offered internet daily deal discounts were evenly split about whether or not they would run such promotions again and confirmed that the offers can cannibalize sales.” The article goes on to suggest that in order to make daily deals profitable, restaurants need to “devise a way to limit the deal to new users” and “structure deals to maximize overage, or customer spending above the amount of the offer, to net higher sales and better cover costs.”

A few months ago, APT CEO Anthony Bruce commented on the economics of daily deals in USA Today.  “Companies doing deals ‘get crushed economically’ when existing customers buy deals.” The article continues, “APT, which represents many Fortune 500 retail and restaurants clients including Denny’s and Wendy’s, says daily deals almost never make sense for major national chains.”

As with any marketing investment, testing these types of daily deals, while analyzing attached sales and subsequent visits, is the only way to fully understand program economics.

Coffee for a Year for under $200: Is it Profitable?

October 31st, 2012 | Posted by CCorman in Promotions - (Comments Off on Coffee for a Year for under $200: Is it Profitable?)

Bruegger’s Bagels, a QSR with over 300 locations, has once again launched its Bottomless Mug Club. During this annual promotion, Bruegger’s offers guests unlimited coffee for a whole year for less than $200. This promotion is certainly unique, but is it profitable? The simple answer is that this program must be profitable for some guests and not profitable for others. However, in order to fully understand the economics of a promotion like this one, restaurant executives need to consider the following (more…)

The Questionable Economics of a “Good” Groupon

June 25th, 2011 | Posted by JMarek in Promotions - (Comments Off on The Questionable Economics of a “Good” Groupon)

This article in the New York Times, plus my interview in Fast Company, got me thinking again about Groupon economics.  To be clear, I’m talking here about the Daily Deal type offers, not more sophisticated customer-targeted, location-based, fill-up-empty-seats-right-now types of offers.

Here’s the crux, a restaurateur describing a successful Groupon in which a consumer receives a voucher for $14 worth of food by paying Groupon $7 ($3.50 of which Groupon pays the restaurant) :

“You don’t make money on the deal,” Mr. Massari acknowledged, “but in the end we are even.”

That’s because “people spend more than on the coupon amount,” he said. “They’ve been ordering about double the $14 from us. And people usually bring other customers, who are paying full price.”

Beyond that, among those who are redeeming coupons, “80 percent have come back without a coupon,” he said.

Let’s think through each piece of that, imagining for the moment we sold 1000 Groupons: (more…)

The Problem with Redemption

December 9th, 2010 | Posted by JMarek in Promotions - (Comments Off on The Problem with Redemption)

In Restaurant SmartBrief’s list of Top Ten articles of 2010, there is an interesting cautionary tale about Groupon.  Well worth reading.  Yet again, the curse of redemption without incrementality strikes.