David Prokupek, CEO and chairman of Denver-based Smashburger, found a way to tailor Groupon, the popular couponing service, to make it work best for his rapidly growing burger concept. “Groupon usually offers subscribers $20 worth of food for $10, but at Smashburger, patrons would have a hard time ordering $20 worth. To make this deal a better fit, we negotiated with Groupon to offer $12 worth of food for $6,” Prokupek explains. For Smashburger, it’s been a win-win situation, as customers who redeem tend to spend about $8 more anyway. “People feel they are getting a great deal, so they sense the opportunity to buy more,” says Prokupek.
But selling a lot of vouchers does not necessarily mean success, says Jeremy Morgan, Smashburger’s SVP of Marketing and Consumer Insights. In fact, many business owners are regretful of selling too many. “We set limits on how many vouchers can be purchased,” he explains. “The day after our Groupon offers run, we get the most redemptions. We have learned through testing how many people to expect on that day and set our overall limit so that we can... handle all the extra traffic. We also plan our deals to align with our slowest traffic days.” Groupon has also helped Smashburger target a hard-to-reach audience. “Women comprise about 70 percent of Groupon users, so it has been a good strategy to get them in our restaurants,” Prokupek adds.
Using Groupon has been most effective as a way to build new brand recognition or reintroduce the Smashburger brand to potential customers. Although Groupon takes 50 percent of the $6 and Smashburger gets $3 revenue for $12 worth of food, “we look at the cost as a media buy,” notes Prokupek. In fact, Smashburger puts the $3 it collects back into the marketing budget.
Smashburger measures its success with Groupon in three ways, notes Morgan.
- It tracks the number of first-time guests redeeming Groupons.
- It tracks the purchase behaviors of redeeming customers.
- It tracks overall sales lift. “A big risk of any coupon program is that existing sales might be cannibalized. By measuring net sales lift vs. a set of control stores, I can tell how much incremental sales I am receiving,” Morgan explains.
Groupon is a force that’s not going away, Prokupek feels. To maximize it for your operation, he suggests sending different offers to different groups of customers. But he cautions, “wait two to three months after opening. You want your store to be well run before you use Groupon so customers will make return visits.”