What’s the Deal?

Have you used Groupon yet?  Or perhaps one of their competitors like Living Social?  Or maybe you have enlisted in the craze of Gilt, Haute Look or Rue La La.  In this Chicago Magazine Article about Groupon and its founder, we get a closer look at how the craze of discounted web-based time-constrained ‘deals’ or ‘boutiques’ began and grew.  But how do you know if one of these sites makes sense for your business?  The critics and supporters vary greatly in their responses to that question.

The interesting thing about all of these sites is that, while some still focus on retail, they all have experience based ‘deals’ available.  Upscale and luxury hotels and spas are more prevalent on the sites like Gilt, Haute Look and Rue La La with vacations offered at well-renowned resorts and featured with amazing deals on various dates.  Groupon has a different concept altogether as, if enough participants do not purchase, the deal is off.  The deals are centered around the local market and most often are experiences including restaurants, spas and other activities. 

As a spa director, restaurant owner or hotelier there are some considerable pros and cons.  First, while the exposure of such a promotion will be broad, client retention is a gamble at best.  Also, while the deal may draw traffic in a short period of time (a plus if done over slow periods), the lower profit margin may simply not be worth it.  You have to ask yourself as well if these really are the customers you want.  If they don’t buy wine, or use your restaurant, your lowered margins may be smaller than you think.  They definitely are if you new guest leaves your guestroom littered with food packaging they brought from outside, or brings three friends along to use your facilities. 

Finally, is your discount-seeking guest your guest?  There is an unquantifiable, but real cost when your well-heeled, corporate-rated business traveler ends up waiting for an elevator only to have Donny Discounter and his inebriated and ever animated posse spill out.  If you have a lounge, this can take a more direct effect.

Also, many skeptics say that it may create a new consumer altogether; one that follows deals and does not become loyal to any one spa, restaurant or brand. 

From the consumer perspective, myself included, Groupon has encouraged me to try experiences at establishments I most likely would not have visited.  Some have gained me as a loyal customer while others have failed to impress.  Unfortunately, when the motivation to buy is strictly ‘art of the deal’ you get what Walter Kirn in this week’s NY Times Magazine aptly calls “procedural voyeurism” which can be described as a fixation on “a compulsive preoccupation with transactions instead of actions and with negotiating maneuvers instead of outcomes.”

So is it the experience your organization provides that the consumer wants, or is your business just the next scene in the consumer’s epic and heroic journey of fantastic deal-making? I know for certain that if it was the deal, the buyer thought they were getting what you offer non-discounted buyers.  So, when a group of college students roll to the front desk of your 4-Star Hotel in flannel shirts and back-packs, they expect and deserve the 4-Star experience. 

That’s the deal.

© 2018 Coyle Hospitality Group 2016. Reproduction of any material without written authorization is strictly prohibited.

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