Groupon Ghetto

This is a gem from our archives. Originally posted April 1, 2012. –Alex

Have you used a Groupon lately? For anything from oil changes to restaurants to pole dancing classes, Groupon and its ilk have set a new paradigm in couponing. The breakthrough marketing tactic has also raised some thorny customer service and business relations issues.

My family uses Groupons occasionally–mostly for restaurants. The results and satisfaction have been mixed. On one occasion, we purchased a Groupon to an upscale restaurant and were treated to a magnificent meal, quality service and a desire to return (though we were dismayed that another customer was allowed to flout the dress code by wearing sweat pants, it didn’t ruin the overall meal).

However, on most occasions as soon as we whip out that piece of computer-printed paper, the waiter sniffs imperceptibly and says “Oh, you’re a Groupon..”

“Well, actually, no, we’re human beings and paying customers,” is the reply I wish I had the nerve to utter. Instead I nod, almost embarrassed.

I realized in that moment I had just been shown the door to…the Groupon Ghetto.

Case in point, last night: Groupon in hand, my wife and I had a date night reservation at a local restaurant that features an adventurous menu of French cuisine. Our Groupon entitled us to an hors d’oeurve, two entrees and two glasses of wine–price maximums for each item were listed. I think it was roughly a two for one deal cost-wise. I was very interested in several things on the menu (which were well within the price range set by the Groupon deal) and was prepared to order when I saw a notice at the bottom of the menu (paraphrasing):

“Groupon users may order items from the right side of the menu only.”

I was crestfallen. Was I a second-class citizen because I used a Groupon?

I’m almost certain that wasn’t the restaurant’s intent–likely the items on the left side of the page were more expensive to prepare and to have the ingredients on hand for potentially hundreds of diners at any one time could devastate profitability. Yet, I still felt that rather than being enticed into becoming a new customer I was instead being asked to take my coupon-cutting ways and enjoy them in second class. I know the restaurant doesn’t want people to feel that way, but perception is reality–and that notice on the menu was an instant bummer. That is a public relations problem.

Setting aside Groupon’s dubious advertising decisions, the backlash of late is being felt by customers and businesses alike. Case in point, a restaurant in St. Louis:

After accepting Groupon coupons for nearly six months, Clara Moore, the general manager and chef at Local Harvest Café & Catering, had almost forgotten about the 3,500 customers who’d jumped on the deal.

Until the last few weeks, that is, when hundreds of those people came rushing in.

After running the staff ragged, pissing off the regulars, cleaning the restaurant out of all but four items on the menu and posting several negative Yelp reviews about their experiences, the Groupon masses left Local Harvest stunned and exhausted. Moore could only say, or rather Tweet, one thing: “Sorry, we won’t be doing Groupon again, guaranteed!”

There’s even a hashtag and website for people who have had bad experiences: #GrouponHell.

On the flip side, I’ve read tales of Groupon users who don’t quite get that just because their meal may be half-off the price, they still need to tip waiters and waitresses for the full price of the meal. That kind of thing certainly puts restaurant staff in a less receptive mood for Groupon users. There’s also the issue of users waiting until the last week of the deal before redeeming it–something that can absolutely throw a restaurant into a tailspin when hundreds–even thousands–of Groupon customers show up practically all at once.

This may be a purely academic discussion, as some posit the Groupon business model will ultimately fail:

While Groupon has seen incredible growth since its infant days in 2008, it is highly unlikely to keep pace in the years to come. The primary reason for this is competition. When current CEO Andrew Mason thought of the idea for Groupon, there was little to no business entities in the arena. Now, there are more than 500 sites worldwide, with over 100 in the United States. Yes, Groupon has penetrated markets in South America, Europe, and the Middle East, but what have they done to distinguish themselves? What is unique about the service they provide? What do they offer that no other company can? The answer is – nothing.

[UPDATED FROM ORIGINAL POST: Groupon's fourth quarter earnings may bear this out.]

Anyway, back to the question. Do Groupon users get stuck in a ghetto of second class service? Perhaps at some places they do. Our service last night was excellent, and indeed it usually is when we use a Groupon. But too often it feels a little like we’re being ghettoized–as if we’re really not wanted. I would consider that it’s all in my head except for that notice in the menu last night directing me to the Groupon Ghetto.

How about you? What kind of experiences–good or bad–have you had with Groupon or similar services? Are you a businessperson who has used a coupon deal? We want to hear from you, too. The comments section awaits–no Groupon required!