Fitzroyalty

Hyperlocal news about Melbourne's first suburb: Fitzroy 3065

vouchers and coupons for restaurants – you get what you pay for

| 13 Comments

After I posted a couple of months ago that L’Angolo Italian restaurant on Nicholson St had closed, a discussion developed in the comments about their use of discount coupons. I have a strong personal distaste of and aversion to the discount coupon or voucher offers proliferating online. I see them as unscrupulous and unethical schemes designed to benefit their creators, not business or customers.

I also consider their use to be a sign that the restaurants who participate are doing so in a desperate attempt to survive when faced with few customers and ongoing losses. But trying to earn new customers with a loss leader makes no sense and cannot be sustained.

We can discuss Brunswick St’s Cruzao Arepa Bar as an example. I liked it when it first opened, but then it became apparent from repeated visits that the service was consistently slow and haphazard, and the coffee deteriorated in quality. Now I only go to Sonido on Gertrude St for arepas.

Cruzao seemed to be struggling for customers and changed its business model, becoming more of an evening bar with live music and less a daytime cafe. It also started using coupons, and there are some strong complaints on a commercial review aggregator site about the consequences.

Offering ‘all you can eat’ can be deceptive if the eating time is limited (two hours) and the service continues to be slow, meaning that they never deliver enough food. In other words, you run out of time before you run out of appetite and you feel cheated. All you can eat becomes barely enough and perhaps not even worth the (discounted) price.

Coupon companies in the US are facing increasing scrutiny about the legitimacy and efficacy of their business models. Coupons are basically a loss leader for restuarants and perhaps also for the coupon companies, leading to suggestions that they are Ponzi schemes.

Coupons may also lead to a restaurant receiving more negative reviews, as we have already seen with Cruzao. Offering loss leading services leads to an inevitable reduction in quality, which is then justifiably criticised by consumers.

What’s the point of making a loss on providing a poor quality experience to new customers? How can that be considered a sensible marketing initiative designed to convert new customers into repeat visitors?

Coupons did not help save L’Angolo, and they seem to be contributing to the creation of more negative reviews for Cruzao. As I previously argued, the sign that a business has resorted to coupons is a sign that they are trouble. To me that means the experience they’re offering may not be very good and is best avoided.

This article questions the growing number of deals and coupons and indicates that consumer complaints about them are increasing. Consumer Affairs Victoria has some helpful advice for consumers and businesses.

Vouchers appeal to greedy people with a desire for cheapness over quality. Discerning customers may realise that they are likely to get what they pay for and, therefore, the desperate marketing of these dubious offers should be ignored.

13 comments

  1. Was waiting for you to finally write on this.

    As reinstated in the other thread your assumption that restaurants who use coupon sites are just a desperate attempt to survive is incorrect. While it may be true in some cases, I’ll give you Shocolate, Los Amates and San Churro as 3 successful restaurants/cafes.

    Shocolate has used most of the voucher companies on the market and has been successful at securing repeat customers. Instead of them offering $x for $x amount of goods, they often offer chocolate degustation session at a reasonable price. The key is to negotiate your deal with the coupon company.

    San Churro is very successful and I believe the Brunswick Street location was the first store. Los Amates is equally successful.

    That said there were a couple of deals that I picked up where you could tell they were desperate for business and simply didn’t care how they treated customers. It all comes down to the business. Plenty of shonky ones out there who don’t give a shit once they have their money.

    I wish I could afford to eat at all of the places you’ve reviewed on this site or other great food blogging sites. Simply enough, an average meal in Australia (let alone Fitzroy) costs more than most countries in the world. If I can score a cheaper meal at a place I like by a voucher company or by eating on a Tuesday, then I will.

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    • Shocolare does seem to have made a clever, value adding offer. Los Amates I’m surprised by as they have often been booked out anyway on busy nights and I don’t know if they need the extra promotion. Perhaps on quiter nights they do. San Churro (the franchise) may be doing well but the original Brunswick St store appears to be struggling. The novelty has worn off, churros are more widely available nearby (Anada etc), and you can get San Churro in the city and the suburbs and so don’t need to travel to Fitzroy for it, etc. I thought they’d benefit from Naked for Satan spillover but perhaps not. None of this alters the impression that vouchers represent a false economy that is only good for voucher publishers, not businesses or consumers.

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  2. I know that no writer can completely strip themselves of their personal biases, and you’re probably trying to comment on how discounts work in a business model, but my first thought on reading this post is that you haven’t quite thought outside your own social and class level. There are many people out there who can’t afford to pay full price at great restaurants. If a discount voucher or coupon allows them to stretch their budget just enough to have a luxury night out – then I love the idea. :)

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    • I think this idea represents a false economy as the discount product or experience is often discounted in quality, so consumers are not receiving the full price experience. That’s the only way businesses can minimise the loss they make from heavy discounting. I am very aware of my socioeconomic status and make ironic reference to it often.

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  3. If you have never bought a coupon/voucher then I don’t see how you can make a judgement that the product or experience differs from what a regular customer would have received. In the majority of the ones I’ve bought, I have received the same service and product as regular diners. That said there were a couple of these where what coupon customers got differed from regular diners and be sure I let them know.

    Then again, I’m picky about what I buy. If I see a deal that seems that way too many bought the voucher, then I’ll skip it. It’s the ones who oversell and can not keep up with the demand, that end up with serving customers an inferior product/service.

    Speaking of Naked for Satan. I’ve been there for regular price pinxtos at $2 and at their heavily discounted lunch for their $.80 pinxtos. Quality and service were the same.

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    • I am basing my argument on the published comments of many consumers. The Naked for Satan discount offer can’t be compared to vouchers as it is a direct offer from the business with no intermediary and no pre-payment. And they encourage you to buy a drink as it says in a sheet of paper in the drinks menu that they need compensation for offering the pintxos below cost.

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  4. Brian, you are right on the money with this and it doesn’t just apply to restaurants either. These coupons are going to destroy businesses and the sad thing is, the businesses most likely to sign up (through desperation) are usually those that can least afford it. The voucher companies are simply running scams under the guise of giving people a good ‘deal’. The adage ‘you get what you pay for’ has never been truer.

    From a business perspective, by the time staff costs, cost of goods, etc come into play, the business is effectively paying customers to be there.. Instead of the other way around! These customers will not become loyal customers. They will just move on to the next great ‘deal’.

    I understand the argument that it makes things affordable for some people who may not otherwise afford it. Don’t they also want to go somewhere they can return to and enjoy the experience again? Why not just have one course, drink water, etc then you can enjoy the experience, and if it’s as good as you hoped, come back and the restaurant will still be there, unlike the examples given.

    Thanks Brian for exposing these voucher scams for what they are.. It’s good to see it written from a consumer perspective not just the business side!

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  5. Perhaps voucher companies should require business owners to go through a basic accounting course before going into an advertising contract. The assumptions made here are that business owners are stupid and can’t properly calculate or read a basic contract. In this case, we may as well extend this course requirement if they want to advertise via newspaper and television as well.

    There are examples given above where vouchers have worked for restaurateurs (Shocolate) and there are examples where it is an utter disaster (Cruzao maybe, Google Bisq for another). The key is to do the numbers. Let’s not pigeon-hole voucher companies deals.

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    • Voucher companies are parasite intermediary capitalists. They exist only to profit themselves at the expense of businesses and customers. They deliberately exploit naive business owners, many of whom are hopeless and stupid at marketing. Asking greedy voucher companies to say no to naive customers is to refute their reason for being and is itself naive. They evidently don’t care.

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  6. Vouchers ans sale sites are brand destroyers simple as that. The worst possible tactic is to trade on price and it sends out the wrong signal to people.

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  7. More evidence naive business owners don’t understand the economics of discounting http://www.globalpost.com/dispatches/globalpost-blogs/weird-wide-web/groupon-bakery-102000-cupcakes

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  8. I think this takes a slightly too narrow view of the way these discount sites are used. I agree that some discounts offered on these sites can detrimental to the businesses using them for a variety of reasons but they can and do work for some. It is vital, however, that the business owners/marketing teams enter into these deals with their eyes open and with appropriate limits on the number of sales and restrictions around when the vouchers can be used to ensure that A) the business is able to meet, the often dramatically increased, demand and B) to do so without compromising quality (and thus reputation).

    As an example, a business I am peripherally involved in in Melbourne used it recently with great success, the offer was for the exact same experience as a full-paying customer however it was done during a historically slow month (don’t forget that many businesses, restaurants in particular, are extremely seasonal and so even those you perceive to be ‘doing well’ may still be struggling if they’re not getting steady trade on quiet days/months).

    For this particular business there were two main goals; the first was to simply get more people through the door during the quieter months, thus creating ‘atmosphere’ and a better experience for both the discount and full-paying customers. The second aim was to gain exposure to a broader market, this is a relatively new business and the marketing and brand recognition they received simply from the discount site’s emails and website was invaluable.

    The end result was that they broke even on the actual offer made however some direct profits were seen in additional sales (booze, mainly) made whilst people were there. They also received a huge amount of (essentially) free marketing, had more atmosphere and a better experience for all customers during a traditionally slow period. They have also had numerous return (full-paying) visits from the discount coupon users since.

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