Marketing Option Assessment - Deal Websites

The deal companies such as snapdeal.com, dealsandyou.com, sosasta.com, dealivore.com, koovs.com, taggle.com are the flavor of the dot-com boom cycle in India with companies like Snapdeal getting huge VC investments.

By design these deal sites are meant for businesses with unsold inventory to dispose off their inventory at very low prices. For a restaurant business, you technically don’t have unsold inventory that goes waste, unless the number of customers coming into your restaurant is so low that even your raw materials get wasted. Most restaurants quickly figure out how their volumes fluctuate through the week and plan their procurement and preparation accordingly to minimize wastage. Add to this the fact that the deal websites want you to offer big discounts (30% plus at a minimum, with 50-70% being their preferred discounts), to make the offer attractive to their customers. In addition they also charge a flat fee of Rs. 49 or about 15% of the sale value for each customer who buys their coupon. So you are probably going to end up losing money or barely covering your costs with the deals you are offering through these websites.
What is the real benefit you get from offering deals on these websites?
You can get a number of people to visit your restaurant and try out your offerings. The hope is that they will like the place and come again and pay your list prices. That is where the problem is – The customers who seek out deals are what I call “Deal Mongers”. Their decisions are heavily biased based on who is offering a deal. So they pick places who offer a deal – and someone or the other is offering a deal on these websites at all times. They are hooked to “Deals” rather than to “Brands”. Plus once they visit a place which offers a deal, the intrinsic value of that place in their eyes goes down. So unless the place offers a deal, they don’t come back. So you have a situation, where a lot of customers come to your place, use the deals (you lose money in most cases) and never come back unless the deal is there.
The other problem you have is that you will probably have a lot of these “Deal” customers visiting your restaurant during your busy days when you don’t really need them. The deal companies don’t want to place restrictions on the deals, as any restrictions would make their customer experience poor. So there is no way you can control when these customers show up.
The real benefit of offering deals on these websites is for a new business with an innovative concept. A new business can use “deals” to really entice customers to visit the restaurant. If the restaurant has an exciting innovative concept (e.g. Biere Club – Microbrewery, or Touche – Touch Screen Tables), then the folks who come, will talk about the restaurant and spread the word. The key would be to stop offering deals after the first month or two, so that customers don’t expect deals all the time.
In summary, I don’t believe the “Deal” websites are a great marketing option for restaurants, except for the new businesses with a very unique concept/offering.