Photo: mollypop via Flickr
A former LivingSocial salesperson recently told us that the industry is saturated and headed for a major shakeout.Based on the attitudes of some restaurant owners in San Francisco, he’s right.
At a dinner last night hosted by social network marketing startup Roost, several restaurant owners said they were getting fed up with daily deals pitches.
Joe Hargraves of Tacolicious said that he has probably gotten 40 pitches over the last year from Groupon and other daily deals salespeople. He refuses them all — his prices are already low, and he doesn’t think he’ll gain anything by one-time discounts to people who otherwise wouldn’t be interested in his place.
Instead, he takes the several thousand dollars per month he would spend on daily deals marketing and other forms advertising and makes regular trips to Mexico, which helps him improve his product. He also blogs about his trips, which creates a much more personal connection to his customers.
Mark Pastore of Incanto — who also had some choice words about OpenTable — called daily deals and other discount marketing “the lowest form of marketing, like puns are the lowest form of humour.”
He said receives one or two pitches a week, mostly from young kids just out of college “who don’t know anything about anything.” He always invites them in to his restaurant to learn more about his business, but says that discount marketing only works for businesses that have nothing original or unique to offer.
Matt Cohen of Off The Grid, a company that schedules food truck appearances and helps them navigate the legal minefield of operating in San Francisco, says that the discounting concept can be valid. But he thinks business owners need much more control on how and when discounts run.
For instance, he’d like for food trucks in his network to be able to offer spot discounts when the weather suddenly turns bad, but then turn them off when the rainstorm disappears. Today’s daily deals services are more of an all or nothing proposiiton.
Eventually, these food industry participants agreed, the daily deals business will have to evolve into a platform that lets businesses handle discounting themselves. The current model, where businesses pay a central discount brokerage like Groupon or LivingSocial, can’t survive.
This is only one small set of anecdotes, but it’s bolstered by other data.
For instance, earlier this month, copywriting firm Cooper Murphy did a phone survey of 300 U.S. businesses about their Groupon participation. Of those businesses, 78% said that Groupon customers are “stingy,” and 82% were unsatisfied with the repeat business they got. Only half said they would participate in a Groupon again.
Those aren’t the kind of customer satisfaction stories that build a sustainable business.