What Kind Of Complainer Are You?

As a restaurateur we are confronted with numerous and various types of complaints. We soon get to sum up who means business and who doesn’t. We immediately get a feel for the nature of the complaint and thereby the personality of the complainant. In this blog I have read about ways that customers prejudge their waiters, and I have read about how waiters sum up their customers. Both have been incredibly close to the truth. I would like to give a little insight into the different ways that customers complain.

Maybe you can identify with one or more methods that you or your “embarrassing to go out with in-laws” try and impart your vast knowledge and experience on an unsuspecting amateur restaurateur. Before I do, let me explain to you my maxim about the customer…

“the customer is NOT always right, but he/she is always the customer, and the customer has the right to be WRONG”

I will list the complaints in order of increasing annoyance.

1. The “I was in last night” phone the next day customer

Often this customer is genuinely complaining for the right reason. They did not want to kick up a fuss at the time. They may have had guests that they did not want to embarrass. They may be genuine fans of your establishment, and they have taken time out from their busy schedule to let you know of their experience. I will always appreciate this type of complainer, and make good.

2. The “I never ever complain but” customer

The moment that a customer starts their sentence with the above, you can know for sure that they are serial complainers. If they really never complained, they would not be embarrassed enough to feel the need to explain themselves to you. A good tell tale sign is often a quick glance around at the rest of the table. You will definitely see someone in the party avoiding eye contact, or rolling their eyes as if to say “not again”

3. The “I have been in this game “customer

The moment that someone has the audacity to call the restaurant industry a “game”, you can know for sure that they have never played it. Anyway if they were so good at it, why are they not in it still (and making money out of it)? I always marvel at the number of professional restaurateurs that are not practicing.

4. The “this is ICE cold” customer (also –“it took hours” and, ”it is inedible”)

A simple “please could you warm this up / won’t you please see why the food is taking longer than it should or, this is a little tough” would suffice. The massive over exaggerations are irritating in the extreme. Do people know how cold ice is? Is it possible to eat 80% of something inedible? Thank goodness the order slips have a time on them; it is useful to show some customers the difference between 15 minutes and “an hour”

5. The “this place has gone to the dogs” customer

The saddest truth in our industry is that we are only as good as a customer’s last meal. Mistakes can happen, and problems do occur. It is heartbreaking however, when a customer who has eaten in your establishment for years, one who we have bent over backwards for to get them their favourite table at short notice, we have manipulated the menu for them and generally sweated to make them feel good, has one bad meal and says “this place has gone downhill, and I will tell everyone I know not to come here. I put you on the map, and I can ruin you”

6. The “this place is never the same when so and so is not here” customer

We tend to feed people’s egos more than their tummies. Often customers feel uneasy when their favourite manager or the owner is not on duty to pamper them. They will be looking for problems from arrival. It makes no difference if that manager has never put foot in the kitchen or does not know a fillet from a rump. They will always say that so and so usually picks their steak for them and it is just not the same without them. These customers are the insecure type who need extra attention.

7. The “I am doing this for your own good” customer

Nobody likes to be criticized. Even when they say thanks for the criticism, nobody likes to be criticized. We will nod and smile and pretend to appreciate what you have so kindly pointed out. Instead we would love to explain some of the reasons as to why things are done the way they are, but we know that you feel you know better than us, and if we defend ourselves we are on a hiding to nothing. Rumours of our arrogance will spread like wild fire. So we smile, nod and thank, but inside think to ourselves “they must be a little slow to complain about the same thing for the tenth time, yet still come back for it”

8. The “We’ll never be back” serial regular

I wish we could just say “then don’t”. in fact I have once before, and got a sheepish smile the next week when they came with a group for a friends birthday. I don’t mean to sound arrogant, but if a customer really will never come back, they usually just leave without saying so.

9. The “I am not asking for anything for free / it’s not about the money” customer

There is no doubt that when anyone says that it is not about the money, then that is exactly what it is about. We tell the customer straight away that we know that they are not doing it to get a free drink or coffee, but we would love to buy them one any way. Nobody declines. The cardinal sin however for a restaurateur, is to promote the entire bill. You may think you are going to really knock their socks off. This will backfire as the customer will immediately tell everyone they know about the fact that the experience was so diabolical that the restaurant did not charge for anything. It is the biggest admission of guilt ever.

There is however only one customer more dangerous to our business then the complaining customer. That is the one who does not complain. The one who really did not enjoy themselves, and just leaves without saying a word. Never to return. I am not asking you as a customer to stop complaining. It is your right. By complaining you are actually giving me a second chance to make good. You are giving me the opportunity to turn a negative situation into a positive one. I have made some life long customers out of disasters. The trick is all in the way the complaint is dealt with.

What I am asking though, is to think about how you complain. Let the severity of the complaint equal the level of unhappiness. Try and put things in perspective and complain maturely and responsibly. I for one will take it more seriously.

AFTER ALL… WE HAVE FEELINGS TOO!

Mr A left out the most dangerous of all complainers ‘The keep your mouth shut, smile at everyone and then trash them on Hello Peter’ type. Let me remind you all quickly before you trash someone on Hello Peter as to how it works… You get to say anything you like, no one vets it, no one checks up on it, authenticates it or contacts the offending company before posting it. The company is notified AFTER the posting appears and is offered a chance to respond. Only problem is… they have to PAY for the privilege of responding to a complaint that anyone can post for free!

Once again thanks to our first guest blogger, watch this space for many more! If you feel there is a budding blogger or closet writer hiding deep in your psyche please feel free to email it to me, it will certainly be considered for publication by our expert panel comprising of myself, my wife and the kids. Who could refuse such an offer?

And but a few days later a well crafted response was posted by the owner of the restaurant
(Original response posted HERE)

Dear Mr Swanepoel,

I hope you are well.

I have phoned you 3 times and have left a message in order to confirm a few details. But there has been no response.

As a passionate restaurateur, it was extremely disappointing for me to see the reviews of my restaurant left on at least two websites today after your unsatisfactory steak at Knife yesterday lunch.

Let me immediately apologise that the quality of your steak was not up to standard, as I am a stickler for standards and work very hard to uphold them. As a business owner trying my utmost to succeed these are not matters I take lightly. Once again I am very sorry.

It is, however, with great dismay that I was consulted by the Internet as to your disappointments at Knife. In the good old days when one was served sub-standard food the waiter was called to alert the manager/owner to a potential problem. Problem was reviewed and dealt with accordingly. It is of the utmost importance to any business to succeed, survive and improve that criticism is levied immediately, especially in the food industry where the evidence, as it were, can go cold. I cannot rationally accept that you were unable to convey your disappointment at the scene of the crime. Maybe it was because you were in a business meeting and felt it was not appropriate at the time, but  I am a hands-on-owner who spends a large part of my revenue on managers for the very reason that 25 years in this business has taught me the perils of keeping standards and obeying the laws of customer satisfaction, if given the chance.

We live in a world where anyone can be a critic – the Internet. But still, with this power accorded to the masses, have you stopped to think of the damage you do, not only to my establishment and the immediate people I support, but also all the people working here and that they support.

I am not saying your criticism is unfounded; I am questioning the way that you dealt with it. In today’s world it is easy to sit in the privacy of one’s own space and tell the world that you will never visit an establishment again and no-one else should. Have you, however, given it any thought that a restaurant is not a factory and is exposed the same daily challenges to achieve the highest standard of delivery. In short, I was not given the chance to rectify the problem.

I therefore would, in my very small way, like to once again apologise that your steak was sub-standard, but plead with you to try and reach a civilised solution to the problem before going viral in a world that can at times both be impersonal and untrustworthy – the Internet.

It would have been very informative to me if you had pulled either me or my manager aside, emailed or phoned and constructively criticised your experience. Instead you chose the comfortable solitude of a computer to air your grievances.

I hope your meeting at least went well.

Yours sincerely,

Ed Saunders

Knife Restaurant
Crystal Towers
Cnr. Century Boulevard and Rialto Road
Century City 7441
021-551 5000
www.knife-restaurants.co.za

Well Mr Saunders, on behalf of the restaurant owners of South Africa and the sane public, I applaud you and your position on the subject.

It is a slow day in the small Eastern Cape town of Humansdorp, and streets are deserted. Times are tough, everybody is in debt, and everybody is living on credit.

A rich tourist visiting the area drives through town, stops at the hotel, and lays a R200 note on the desk saying he wants to inspect the rooms upstairs to pick one for the night.

As soon as he walks upstairs, the hotel owner grabs the note and runs next door to pay his debt to the butcher.

The butcher takes the R200 and runs down the street to retire his debt to the pig farmer.

The pig farmer takes the R200 and heads off to pay his bill to his supplier, the Farmer’s Co-op.

The guy at the Farmer’s Co-op takes the R200 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her “services” on credit.

The hooker rushes to the hotel and pays off her room bill with the hotel owner.

The hotel proprietor then places the R200 back on the counter so the rich traveler will not suspect anything.

At that moment the traveler comes down the stairs, states that the rooms are not satisfactory, picks up the R200 note and leaves town.

No one produced anything. No one earned anything… However, the whole town is now out of debt and now looks to the future with a lot more optimism.

I am often asked how I am able to get great service from waitstaff when I go out. let me assure you it is not because they have my picture posted on the notice board under “Big Tippers” or “Friggin Blog Writers” it is because after almost 20 years of working in and with the restaurant industry I have been able to work out “What makes waiters tick”. Sure, big tips make for happy waiters but big tips come AFTER the meal and I want a smile and good service during the meal. So what is the secret? Actually it is not a secret at all and you are welcome to try a few of these the next time you go out.

Hint Number 1:

• Smile. People simply do not smile any more. Most of the time they look bored or angry or both. Look your waiter right in the eye and smile with a bright, genuine smile. Genuine, because his or her presence means you are about to enjoy a meal–which is a whole lot better than standing in the queue at the door.

Hint Number 2:

• Be polite. Some people feel it is their God given right to be rude to waiters and others in service positions. Stand out from the crowd by treating your waiter with common courtesy. Say ‘please’ when you order, and thank you. A polite ‘excuse me’ to gain attention works wonders compared to an across-the-room ‘HEY!’ Simple manners are one of the best ways of obtaining great restaurant service.

Hint Number 3:

• Be respectful. Diners often treat waiters as lower class citizens. This is the wrong approach, since service does not improve with condescension. Think of your waiter as an important person whose expertise you seek. Respect goes a long way in motivating good service.

Hint Number 4:

• Remember to empathize. Your waiter has been standing for several hours and has endured sore feet, rude guests and a hot kitchen. This person looks forward to the end of the shift. Make a comment that shows you empathize. “Wow! You guys are really buzzing today. I hope things calm down for you,” or “Gosh my back would hurt in this job. How do you do it?” This small nod to his feelings shows you see him as an equal, rather than a servant.

Hint Number 5:

• Use a little bit of charm. Don’t over do it, just a little twinkle. . If the waitress anticipates the need for extra napkins, thank her with a smile. If she has pretty earrings, say so. Find at least one thing you can genuinely praise. It is not a difficult task, but many of us have forgotten how to give compliments. Your waitress will appreciate receiving one.

Hint Number 6:

• Tip well. Most wait staff rely heavily on your generosity. Their livelihood depends upon tips, and give the ‘standard 10 percent’ for mediocre service. Tip good service 15 percent, and exceptional service much more. Odds are you will be back and servers remember good tippers!

And one final point to ponder… before you decide to show everyone at the table just how rude and condescending you can be to a lowly waiter, REMEMBER he handles your food when you are not looking! (For me that is a good enough reason to smile and be polite)

Turns out it was none of the above, all they had to do to get the stores full and everyone talking about them was give away a couple of million Rands worth of breakfasts country wide. Suddenly my inbox started to fill up with questions and comments about this ploy… Why where they doing it, how could they do it, will it work, how long will they keep it up and who was going to pay for all that.

I am not employed by Famous Brands, never have been and am pretty certain I never will be, so the opinions expressed herein are entirely my own and based on nothing more than 25 years of experience in the food industry. I make no claim that my assumptions or opinions are fact and would like to stress that they are just that… Assumptions and Opinions. With that said, here we go. PS I am not employed by Spur either.

So let me begin with the why… that is pretty simple, Spur’s Unreal R19.95 Breakfast has been giving them sleepless nights and empty tables. You get 2 fried eggs, 2 rashers of bacon, fried tomato, chips, two slices of toast with jam and butter. Actually unbeatable and if there is any profit in that I will eat humble pie (available for R19.95 anytime BUT breakfast). Back to Wimpy, you see when you are not sleeping at night you have lots and lots of time to dream up stuff like “Hey, let’s give the breakfast away! Nobody can beat that price. We’ll teach Spur a lesson”

Do you remember the movie “Out Of Africa”? There is a scene where Karen Blixon has just chased a lion away from one of her cows and her man servant Farah says to her “Msabu’s bleeding. She does not have this ox. This lion is hungry. He does not have this ox. This wagon is heavy. It doesn’t have this ox. God is happy, msabu. He plays with us.”

So Spur is not happy, they do not have this business, the Wimpy Franchisees are not happy, they do not have this money, many other restaurants are not happy, they don’t have any customers, the waiters are not happy, they don’t have any tips but the public has breakfast, they are happy!

Many moons ago when Mugg & Bean was but a young upstart finding its way in the world, I held the position of marketing manager and I too used to “dream stuff up.” I once dreamed up a promotion with MasterCard that cost me my sanity and almost cost me my life. Use your MasterCard to pay and you walk off with a FREE bottomless coffee on your next visit. The logic behind it was quite simple “We would rather have you sitting in our restaurant drinking free coffee than sitting in the competition paying for it” You see while you were sitting in the Mugg, you could not see the other restaurants menus. Waitresses, food, specials etc

Customers loved it, Franchisees hated it but Mugg & Bean was soon a household name and everyone was “meeting at The Mugg”. Wimpy on the other hand are already a household name, there is surely not a single Souf Effriken who has not eaten in one, passed one on the road or at least heard of one. So this cannot be seen as a brand building exercise. There is an old cowboy expression, when you go out looking for revenge Dig Two Graves… Nobody wins a price war!

Now, the $64 000 question is, who is gonna pay for this? And if you, as the general breakfast eating public, are not asking this question, trust me, the Wimpy franchisees are! At a guess (an educated one, I think) head office have probably done a MAJOR deal with a couple of suppliers and will reimburse the franchisees at cost price (at least that’s how I would have tried to set it up.) So although this MAY not cost the franchisees anything in raw material there is still the question of staff and operating costs to take into account. How will the whole operation be handled from a VAT point of view?

Now I am a fan of Wimpy’s and my favourite on the road meal is the toasted cheese, hold the tomato on white bread with chips, BUT I can only eat in a Wimpy once a day and if I get to choose it will be when I am not getting a bill. So my thought is that anyone who had the Free Breakfast did not come back again today and maybe not even tomorrow unless it is for the Free Breakfast again. So there is all that lost revenue to account for.

What will happen when the promotion ends, will I suddenly be prepared to pay for my breakfast again? Not at your old price I won’t. Even if I was prepared to forego my Spur R19.95 breakfast for a free one, I sure aint gonna forego it for a more expensive one. What next Wimpy, you are going to have to match the Spur breakfast after this… for ever. Spur’s ticket average throughout the day must make Wimpy’s pale into insignificance so they can afford to break even on breakfast and make up for it at lunch and dinner. I am not certain Wimpy has the same margin for discount.

If you are wondering how long they will keep this up, I would guess (again) that it will run until the end of the month… Just kidding! Any more than one day and there will be blood on the streets, I honestly don’t think they could possibly keep it up any longer without a Franchisee Revolt. I would love to be a fly on the wall the next time a couple of Wimpy franchisees share a moment together (maybe over a Spur UNREAL Breakfast… Just kidding). In fact I just had an evil thought, Spur sends 1000’s of waiters to eat at Wimpy as a thank you.

Anyway, evil thoughts aside, desperate times call for desperate measures and no one is really sure how this will play out in the long run. It is a gutsy move and I take my hat off to the management team who made the decision and to the field consultants who have had to deal with it. Well done Wimpy, breakfast may never be the same again.

Having bought herself 48 hours (big mistake) Zyda Rylands, Woolworths MD of Food finally made it into the hot seat on Bruce Witfield’s ‘The Money Show’ on Wednesday evening and promptly dug herself into a hole so deep you could easily park a Woolies delivery truck in it. Zyda dear, someone forgot to tell you the rules of Public Relations have changed…

The old rules…

The company’s senior management, with a lot of input from marketing people, spin doctors, and lawyers would work out a company’s message and talking points. These usually focused around…

• Deny everything!
• Blame someone else!
• Believe me because I said so!

The aforementioned company representative, with the help of the internal public relations team try to brand this message into the hearts and minds of the public usually through…

• Repetition
• Bullying
• Marketing speak (sometimes known as lies)

The unsuspecting journalists then lap up this information and regurgitate it in some form that allows them to appear intelligent without actually saying anything or questioning the integrity of the company who was usually responsible in some way for their income through advertising, because you certainly don’t want to…

• Kill the goose that laid the golden egg
• Piss someone off in editorial
• Jeopardise your career

The aforementioned Zyda Rylands, clearly having completed a course at the Sathyandranath Ragunanan Maharaj School of Public Relations, proceeded to break all three rules in quick succession.

1. Coming on air 48 hours late, she proceeded to present a clearly corporate stance by starting off with a far from convincing apology for being out of touch for the past few days and that was quickly trashed by a tweet from Gus Silber (@gussilber) “Amazing, in 2011, how a Woolies exec can use “I was overseas” as an excuse for not responding to a reputational crisis.” To say she sounded as though she was reading the company line off a teleprompter would be an understatement. She also went on to say she had returned from overseas ten days ago.
2. Using terms like “our strategy is to build small suppliers” and “we are a proud privately label company” and “working with people who understand our brand and our ethos” and “if I could have my time over” she then danced around the questions posed to her like she was appearing on America’s Got Talent.
3. Oops, here’s where things suddenly deviated from the script!

In his usually dogmatic style, Bruce would not allow her to dodge the Cinnamon Cola debate and I shall get to that one a little later on. She tried her best to sound convincing, sound sincere and sound like she believed her own drivel, but alas no one was buying it. The new breed of citizen journalists were listening to each word intently, picking up on the slightest error or deviation and sending it out on twitter, Facebook , whatsapp, BBM, blogs and websites.

And as the bard once said “Herein lies the rub” – The world of journalism, PR and information dissemination has forever changed. Let’s not take away for one second, from professional journalists who spend hours researching stories, checking sources and developing their articles. The new breed of “journalists” are listening intently, adding a social sentiment to their stories and sending them out at the speed of data and it is this group that have taken Woolworths to task over the past few days.

Within a few seconds of her comment that Cinnamon Cola was manufactured and sold in South Africa some 20 years ago, Google search was inundated with requests for information and the ONLY source of Cinnamon Cola in the world appears to be Frankies (and now Woolworths too!) Searches on sites like The American Beverage Association (http://www.ameribev.org) offered no results, the only reference that I could find was a relatively obscure posting on http://www.city-data.com/forum/food-drink/593929-info-re-cinnamon-flavored-cola-stores.html#ixzz1hCXh4qxZ where some one inquires… “Does anyone remember a cinnamon flavored cola drink distributed 15-20 years ago? It was called Icey Spicey Cola or Icy Spicy Cola. I think the Crystal Springs man delivered it, but I can’t find one that carried it or has been around that long. I have searched the web for it several times. (All I get is Coca-Cola sites, and spicey food sites.) It came in a light blue bottle, and was incredible. I can make a close replica using cinnamon flavored simple syrup and regular Coke. My son says I should have drank more of it, so they would still carry it in stores, I tried. I have contacted several distributorships of soft drinks, and no one remembers it. I used to have to drive up to 50+ miles to get it, but when you are a fan that isn’t weird. The little tiny stores were the ones most likely to have it, but occasionally a chain supermarket would have it.”

An extensive search for Icey Spicey, Crystal Springs and Golden Brands Bottling Co have yielded no joy and so I am hoping that Woolworths or their supplier Chill Beverages (http://www.chele.co.za) will clear this up… Clearly Woolworths have taken the stand that they have not copied anything, flavours, colours, names and packaging from Frankies and although I am no legal authority, I believe Frankies would battle to prove otherwise in court EXCEPT on the topic of Cinnamon Cola. Here I believe Zyda was either misinformed or decided to deviate from the script.

Accusations have been flying across the twittersphere about Woolworths ability to copy (rip off) designs and products from small business owners, but what about their supplier Chill Beverages? A quick visit to their products page and a look at their INNESENSE range (http://www.chele.co.za/product-innesense.php) bears a striking resemblance to Jones Soda Companies range (http://www.jonessoda.com/beverages/pure-cane-soda.html)

So Chill Beverages will be invited to respond, on 702 or even this forum if they wish but I believe they have more than a little to answer for!

So Zyda, “The lady doth protest too much, methinks.” And I believe you have tripped over your own PR and may still find yourself and your brand under fire for some time to come. Now do the right thing and get your supplier to respond so that you don’t have to be “distraught”

Lesson To Big And Small Companies… Act fast, act decisively and act honestly, everyone is watching!

and if cinnamon cola existed anywhere in the world you would probably find it here… Amazing website of brands and stuff… http://www.trendhunter.com/slideshow/bizarre-beverages#62

More on the Woolworths Frankie’s Cola story at www.woolworse.co.za

Following closely on my two previous blog postings, I had a request to meet with the CEO of Groupon and allow them the opportunity to put forward their case. In the interest of fairness, here is a the complete, unedited response that was received from them…

Groupon has a complete open door policy that enables customers to communicate their grievances through many different mediums, namely Facebook, Twitter or our hands on customer service team. Our vendors on the other hand have an entire team of employees who go to great lengths to ensure that they get the best from their deal while receiving maximum exposure. This team also endeavours to ensure that the vendor is 100% happy throughout the Groupon process – a process that is explained explicitly to them every step of the way.

We have a very rigorous approval process and provide all the information necessary to inform businesses what we as a company offer. We strongly advise that all contracts are read thoroughly so that all parties understand the nature of the service, just as one would read any contract when entering into a business agreement. Client satisfaction is something that we take immense pride in, and our vendor management team works very hard to make this happen.

We give retailers access to our very extensive database in an effort to accelerate the growth of the businesses who partake in our offerings. We are a marketing activity not a revenue activity, and compared to traditional media our service is the most cost effective and risk free form of marketing available.

To address the queries raised around VAT: We charge our commission on the full coupon price; hence if this is a VAT inclusive amount for a merchant who is a VAT vendor it escalates the actual net cost by an additional 7% (if our commission is 50%). Groupon is VAT registered. It is also noted on our contract that we will charge VAT on our commission. And we do supply VAT invoices. No effort is made to conceal this, in fact our representatives are trained to make sure this is thoroughly explained.

Of the 50% commission we take, the majority is put straight back into advertising the deals to ensure that they reach the ears and eyes of more customers through as many mediums possible, and towards things such as increasing our staff capacity to assist our clients.

We sincerely wish the service had been as agreeable for this vendor as it has been for others. We offer our sincerest apologies that this has not been his experience, and hope he will give us the opportunity to rectify the situation. Had the vendor communicated their grievances directly with us we could’ve dealt with their complaint accordingly.

I have received numerous responses by comment, email and call on my previous blog posting http://brandstrategy.co.za/deal-or-no-deal BUT this one struck me the most. Here it is, a real life South African restaurant experience… Take note!

With thanks to GeeKaySA who posted it…

I believe Mike mostly writes about the restaurant industry, and for restaurants, staff costs and utilities eat away a major part of your turnover, even more so with the ever increasing minimum wages, electricity and gas prices.  I agree with him that most restaurants will not benefit from running a Groupon (or similiar) deal, and I speak from experience.

We ran a Groupon deal the past three months.  The expiry date is tomorrow, and I cannot wait for the ordeal to be over.  Groupon’s commission was actually quoted at 50%, which means of the total normal selling price of the deal, 55% was promotional, 22.5% went to Groupon and 22.5% came to us.

Now that is some ways below the industry average to even cover your stock cost, but we really needed some marketing, and this seemed like a good targeted approach – i.e. you pay for what you get.  I was swayed by the salesperson’s nifty spreadsheet showing extra income from beverage sales, and future returns from returning customers.  I expected that, with the extra beverage spend we would at least be selling this deal at cost (and we’re just talking basic stock cost here, not overhead) and that we would increase awareness and attract some returning guests that have not been here before.

As the deal progressed, however, some more details emerged that made the whole thing a lot less palatable:

∙ First off, Groupon’s quoted commission percentage did not include VAT.  I know I should always read the fine print, but hey, I am rather busy running a business here.  Tack on the VAT, and Groupon now pockets 57% of the pittance we sold the vouchers for.  Or in other words, the restaurant’s income is now less than 20% of the normal price of the meals.

∙ Secondly, Groupon very glibly dodged all my enquiries about what happens to the money for the vouchers that are not used by the expiry date.  It’s pretty clear they intend to pocket all of that.

∙ Also, Mike is absolutely right in his prediction about the type of “customer” these deals attract.  A large proportion of the people who visited us with vouchers in hand ordered a glass of tap water with their meal, and didn’t tip the waiter a cent, even though they eagerly told the FOH staff “how lovely” their dining experience was.  Now the waiter’s tip makes no difference to our bottom line, but it’s a pretty sure indication that you’re not dealing with big spenders here.  I will never see them again unless I offer another break-the-bank deal.

∙ And lastly, if you’ve even got remotely good accounting & control procedures, don’t underestimate the extra admin time dealing with these vouchers will add to your process.

And to add insult to injury, I even had to deal with the following gem:

Guest books a table for Groupon voucher deal.  Guest arrives and meals are promptly served.  Guest notifies manager of hair found in meal.  Manager replaces meal (at no charge, of course) even though we are extremely strict about head covering AND the only person who got close to the meal in question with even half the length of hair as found in the meal is the guest himself.  (He had shoulder-length hair, the chefs, manager and waiter all have either short ethnic hair – I’m trying to be politically correct, please don’t flame – or short-cropped military-style hair.)  Guest essentially gets 3 meals for less than the price of one.  Thereafter the “guest” proceeds to write a negative review about the “hair in his food” in a website review.  Yes, all in all, this was a brilliant marketing exercise.

Stay far away from these deals, would be my advice.  It’s not worth the misery.

Enter Groupon et al and all the promises of new customers, repeat business and full restaurants. Groupon and other local and international deal makers have proven to be wildly popular. What’s not to like? I can get a R500 massage for R199, I can get my hair done at a fraction of the price, learn to use all sorts of equipment and dine out at 60% off… Who wouldn’t like it?

Well apparently some of the merchants aren’t too enamored with it and before you sign on the dotted line there are some things you need to consider. How do I know this? Well my consultations with restaurants and small businesses throughout South Africa have highlighted this point time and again.

On the upside there is the marketing shpeeeeeel you will surely be dealt:

We bring a lot more customers to your door… You certainly do get to attract more customers who were never going to visit you at your current prices the only problem is will they return when the price is back to “normal”?

We will advertise your business for you… granted this is a BIG PLUS! They have huge resources and data bases that few restaurants/businesses could reach on their own. So if you are doing this as a brand building exercise and the costs are right… Go for it!

We will help you move stock… great, just make sure it is stock you were not moving already! And try to ensure that moving all that stock isn’t actually costing you money.

We will help you build relationships… well not with a one-time deal but what if you could structure a deal that was rewarding if customers came back a few times in order to get the benefit of the deal?

We generate revenue… if you have a low cost or fixed cost business, this would be ideal. Let’s say you owned a bowling alley with fixed costs and overheads and a product that was not being depleted (besides a little extra maintenance) this would be fantastic. Maybe a hotel room or conference venue that was standing empty BUT if you are reading this, you may own a restaurant with HIGH input costs and possibly even turnover clauses with both your landlord and your franchisee… now things get a little tricky to say the least.

So even the upside appears to have a downside and I haven’t even mentioned the real problems you may anticipate.

But before I mention them, the first thing you really need to understand is exactly how a discount affects your profitability! For the purposes of this exercise I use the example of a restaurant and will do a simple calculation; assuming you do R10 000 worth of sales at a 40% cost of sale (here’s where I hope you know your cost of sale) and you have other expenses (rent, staff, gas, electricity etc.) that comes to 45% that would effectively mean that for Every R10 000 in turnover you are paying out R8 500 and retaining R1 500 for yourself. If I am erring at all I am erring on the generous side, quite a number of restaurants are retaining a LOT LESS)

Now if you did R10 000 worth of sales at a 55% discount (Round about what they will explain to you “works” as a deal), you will only receive R5 500 (LESS any charges that they add and I have it on good authority that this is between 20 and 50% and there is a processing fee too.) and it will still cost you R4 000 to produce the food, your overheads “may” reduce fractionally (let’s say a generous 10%) to R4 950. So the deal still cost you R8 950 and you got back R3 500 (if you are lucky)

This little marketing exercise ONLY cost you R5 450 per R10 000 turnover. Now the deal is over and you are waiting for all those customers to come back and enjoy your faire at the “normal price”. (Don’t hold your breath) Let’s say they all come streaming back (yeah right) you need to understand that at your current retention of 15% you will need to do an ADDITIONAL R36 333 in sales to make back the money you paid out to run the deal. Mark my words, I am no accountant or rocket scientist, BUT basic mathematics seems to be at work here.

Aren’t you glad I got all the GOOD NEWS out of the way first? Now let’s take a look at some “challenges” (Us marketing people hate to say PROBLEMS) you may encounter.

Deals are simply not good for your brand image! Now that you have offered that deal at a discount price how are you going to convince everyone that the meal/product/service is still great value at the old price? Have you been fleecing them all along? Will you be fleecing them now?

Deals don’t generate repeat business! Chances are you will never see those “new” customers again unless they have another voucher in their hand. Research in the US shows that about 19% of voucher users may become repeat customers, that means it takes a long time to recoup that “marketing spend”

Deals attract bargain hunters! The majority of users of these programs are “deal seekers” and bargain shoppers and this means there is a low spend per head and little chance of return. Then there is the problem that the more people that redeem the voucher the more it costs you for your marketing exercise, so be sure to put a limit on how many vouchers can be sold.

Deals are not profitable! Don’t wish to belabor this point but please ensure you have a clear grasp of exactly what is at stake here.

Of course there is one other point that they may not mention and that is the point of “breakage” Nope, that’s not what your waiters drop, that’s the term used in loyalty programs for deals not redeemed. Let’s say they sell 500 deals on your behalf but only 400 people arrive to redeem within the allotted time… They collect the money and only pay over for the redeemed vouchers (less there more than tiny commission) to you. So, unclaimed vouchers are in fact more valuable to them than the claimed ones.

My good friend Nick from Global Wrapps Franchising took the trouble to write to me and point out the following positive aspects of these programs. (And for this I am eternally grateful)

• Excellent method to create awareness of a new brand or new location or new product range.
• The ability to target a specific market segment. Those with internet access and credit cards.
• It is up to the store owners & staff, to create return customers, by providing excellent service and quality.
• Voucher users are usually big talkers/Facebookers/tweeters who tell everybody about their great deal thus spreading brand awareness.
• All advertising costs money and the mathematics applies to all advertising campaigns. Compare the cost to running a radio campaign, TV ad or billboard. We know print ads are a waste of money and time. And the result of these campaigns are very hard to measure.

Undoubtedly nothing beats word of mouth advertising but Groupon style campaigns certainly have their place and that place is certainly ahead of print campaigns and for most small traders ahead of radio and TV.

Of course there are many instances where deals will work and I am not suggesting for a second that you dismiss them out of hand, but please go in with your eyes wide open not like Posie Bakery & Café in Portland Oregon (Visit http://posiescafe.com/wp/?p=316 for the details)

Groupon In Retrospect

Posted by Jessie on Sep 11, 2010 in Blog | 126 comments

Note: Unexpectedly, this blog post has spread through cyberspace like wildfire. And I will attempt to respond to each comment as it comes in, though it may take me a few days…

Before commenting on this blog post, please note that the purpose of this post was to explain to our loyal customers who visit our little cafe 1) why we would not be accepting Groupons after the expiration date, and 2) share with the consumer how Groupon works for the business, the actual percentage split between Groupon and the business, etc.

I take full responsibility for my decision, as you will read in the post below. Please do not attempt to interpret this post as me blaming Groupon or our customers for anything. I am merely sharing the experience. The decision to run a Groupon campaign was my own decision, and one I regret. Lesson learned.

And finally, our dear and loyal customer, Lucinda, was taken care of. She is the loyal customer that encouraged me to write this blog post, and for that I thank her.

For months I’ve been thinking about whether or not to write a blog post about Groupon, and sharing the kind of experience it has been for the business. I’ve been weighing the possible repercussions of such a candid post as well, but after today, and having to decline a longtime customer’s Groupon for being past the expiration date, she asked that I share with everyone the reality of Groupon.

Today one of our most loyal customers, Lucinda, came in and asked if she could use her Groupon that had expired the day before. I felt terrible, but I had to say no. I knew she was upset, and I wanted to explain, but there was a line, and it would take longer than the few seconds we had together there to share why I couldn’t. She came up to me later when there wasn’t a line to tell me that she was really disappointed, that she had been a longtime supporter of Posies through the Mamananda Group, and that this experience made her never want to come back. I knew she felt my declining was personal. So I explained to Lucinda, and now to all of you, how Groupon works for the businesses, and why it has been the single worst decision I have ever made as a business owner thus far…

I heard about Groupon in January of this year from a friend, and after doing my research, I thought the idea was pretty clever. I, the business owner, would offer a discount to the consumers utilizing Groupon’s social network, and we would get noticed by many who may never have seen us otherwise. A great marketing opportunity and way to increase future foot traffic! I assumed Groupon would take a percentage, but that it wouldn’t be that huge… maybe 5-10%? I spoke with John, a Groupon rep, and we started formulating the idea. He didn’t have to sell me on the concept, I understood and thought it was genius. Then we talked pricing. We were going to offer a $6 for $13 (pay $6 and get $13 worth of product) because John told me people really respond to deals that are over 50% discount. It wasn’t starting off as that great of a deal for us, but we kept talking. Then we talked the percentage split. John told me that when the consumer pays less than $10, Groupon usually takes 100% of the money. What?! He reassured me that most customers buy more than the $13, and that we would never have to advertise again after taking advantage of their network. In my mind I thought “false. You can never stop advertising as a business,” but out loud I said, “Ok, let me think about it.”

I hung up and thought it over. I called him back and said we would have to get at least 50% to cover our costs of product… to this day I don’t know why I thought even 50% would be a good deal for us. Maybe because I thought since we were covering our food costs. What I didn’t think clearly enough about was that that margin we mark-up is what covers all of our other costs… like staff, rent, utilities, etc. Our overhead is roughly $25,000/month, and this decision was about to make it so that we didn’t cover any of those other costs.

Against my husband’s advice, I decided to do it knowing how many other businesses I admired had utilized Groupon. We were featured on March 9th and sold nearly 1,000 Groupons. When I talked to Lucinda today, she asked if there was a cap on how many were sold to help protect the business from too much loss, and the simple answer is, no. When you sign up for Groupon, you are agreeing to sell as many as get sold… and why would Groupon want it any other way? They get half of the earnings.

We were bombarded the first weekend after our feature because our feature had come out a month late, and unfortunately coincided with the Kenton Library’s grand opening. Over the six months that the Groupon is valid, we met many, many wonderful new customers, and were so happy to have them join the Posies family. At the same time we met many, many terrible Groupon customers… customers that didn’t follow the Groupon rules and used multiple Groupons for single transactions, and argued with you about it with disgusted looks on their faces, or who tipped based on what they owed (10% of $0 is zero dollars, so tossing in a dime was them being generous). Or how about the lady that came in the day of Groupon (though you’re not technically allowed to use them until the day after) and asked for the Groupon discount without an actual Groupon in hand because she preferred to give us all $6 rather than half of it to Groupon. While the idea is noble, this causes mass confusion among the staff and makes it seem that without commitment, anyone should be able to get anything off of our menu for 50% off.

After three months of Groupons coming through the door, I started to see the results really hurting us financially. There came a time when we literally could not make payroll because at that point in time we had lost nearly $8,000 with our Groupon campaign. We literally had to take $8,000 out of our personal savings to cover payroll and rent that month. It was sickening, especially after our sales had been rising. Sure, maybe thinking of it as just marketing may seem justified, but anyone that knows me well knows that I would never pay more than $100 for advertising, much less $8,000, because I don’t believe that regular advertising had much return on investment at all. So the experience jaded me, and the interactions with the few bad Groupon customers we had jaded our staff. After all of this, I find myself not even willing to buy Groupons because I know how it could hurt a business (side note: service industry businesses do quite well with features like this because it is just the cost of time – you are not paying for a product for resale. Resale, in my opinion, get hit the hardest).

In short, to dear Lucinda and anyone else that comes in with a Groupon in hand, please know that our respectful decline of your coupon is not personal. It’s because we cannot afford to lose any more money on this terrible decision I made, and the only saving grace we had was an expiration date.

Nothing stirs my blood more than reading some Tjop babbling on about how poor the quality, lousy the view and expensive the prices are in Johannesburg’s restaurants. Restaurants are not about the food, they are about how they make you feel and although I am no psychologist I would imagine that if you walked in feeling slightly inadequate you may walk out feeling the same. Of course you could always go home and do your best to slate everyone and everything in the hope that getting a few agreeable nods and pompous chirps at your next privately hosted dinner party (Where I am certain you will manufacture a view for your guests) will make you feel much better about yourself.

Restaurants are an intricate balance of Commerce, Art & Passion and all too often a lack of concentration on the Commerce side leads to the speedy decline and quick death of the restaurants in question. Greenside of a few years back was a very fine example of this… Award winning restaurants that never saw their second season. I have said it before and I will say it again “If you want to know the best restaurant in town, don’t ask a food critic (or a newspaper editor trying to fill columns and sell papers) just ask your bank manager” No, he (or she) does not eat in all of them, he (or she) sees the deposit slips. Restaurants are in Show Business! Not Show TIME or Show FUN but Show BUSINESS.

They have overheads to pay, staff to look after, loans to service and profits to generate for STEAK holders. They are operating in an extremely competitive environment under trying circumstances. They offer employment countrywide to hundreds of thousands of unqualified staff seeking their first jobs or an opportunity to better themselves. Locations are expensive, views are few and far between and customers, feeling the pinch themselves, are reluctant to hand over their hard earned cash unless they see value in return. To some the value is in the size of the portion, the taste of the dish or the rarity of the wine served. To others it is in how the restaurant makes them feel, how pleasant the staff or familiar the surroundings… whatever your fancy, you will find it in Johannesburg! (You will find it in Cape Town, Durban, Bloem, PE, Pretoria and almost every city and town you visit too!)

So spoil yourselves, go out for lunch, for dinner, breakfast or just a light snack or a cup of coffee… If the restaurant lets you down, let me know, I will take them to task personally. I will make a call, chat to the owner, discuss how things can be improved and get you some real feedback. I won’t write about it, bitch about it or moan about it, in the hope that somehow this will improve things for both you and the restaurant.

PS I like my Tjops rare… vary rare! Let me know when you are heading back to Cape Town, I will organise you a farewell lunch at one of Johannesburg’s finest, smokiest, nosiest, carcass infested, red wine serving, overpriced, limited view steakhouses… If we can get a booking!

PPS Can’t wait for the next Mail & Guardian Advertising Representative to try and sell some space to one of Johannesburg’s restaurants!