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In September 2011, Boston University and Harvard students released a study suggesting that running a Groupon promotion lowers a merchant’s Yelp rating.

 

Their finding left us wondering two things: why does this relationship exist, and what, if anything, can restaurants do to minimize these negative effects? To address this, we researched why by analyzing 736 Yelp restaurant reviews across 75 restaurants where the reviewer cited using a deal voucher.

Our findings were consistent with the above study in that Yelp ratings suffer when merchants run “daily deal” promotions:

On average, deal-reviews are .5 stars below the restaurant’s overall Yelp rating.



77% of deal-restaurants suffer an overall negative impact on their Yelp rating.


Two theories could explain why deal-diners write harsher Yelp reviews:

 

  1. Deal-diners are more demanding (and troll-like) than normal diners.
  2. The circumstances of running a “daily deal” promotion creates potential customer experience problems that otherwise would not exist.

 

While theory #1 may contribute to some degree, our research found theory #2 to be most convincing. We analyzed deal-customer complaints in reviews and identified two primary deal-specific problems:

 

Redemption Issues – The deal voucher was denied (in violation of deal terms or not found on the merchant’s voucher list) or improperly applied to the check.

 

Perceived Discrimination – The deal-diner felt that they received inferior service (or smaller portions) because they used a deal voucher.

 

our server made such a big deal out of us having a Groupon … that it was uncomfortable. She acted like we wouldn’t tip her or something…” 


Note: preliminary data from our point-of-sale tracking of deals suggests that the average deal-diner tips as well as a non-deal diner.


16% of complaints in deal-reviews are a direct result of the deal itself. "Standard Issues" are complaints in deal-reviews that are independent of the deal (e.g. "the food was too salty.")



In other words, the circumstances of running a deal created 16/84 = 19% more undesirable experiences than what a non-deal diners would have experienced. When there’s increased potential for things to go wrong, Murphy’s Law tends to take over.

 

There are certainly other variables involved to explain why deal-reviews are on average .5 stars lower than non-deal reviews, but a 19% increase in bad experiences for deal-diners must be a primary explanation.

The good news is that restaurant operators can take proactive steps to address these deal-specific issues:


Redemption – Simple Terms & Seamless Process

Keep the terms and restrictions of the promotion as simple and clear as possible. Any complexity or ambiguity will result in the lose-lose situation of either denying a voucher or accepting a voucher in violation of its terms. If you deny a voucher for any reason, a bad Yelp review could follow.

Consider technology to make the redemption process as seamless as possible (like point-of-sale voucher redemption). Remind waitstaff on how vouchers should be applied to the check.


Perceived Discrimination – Consider the Diner

Deal-diners can feel insecure and hypersensitive to the idea that a server may be judging them as “cheap.” Even if your waitstaff are genuinely not judging, it’s all a matter of the diner’s perception. If the server makes any gesture that can be perceived by the diner as judgmental, then confirmation bias kicks in and the diner’s fears and insecurities are realized. Bad tips and Yelp reviews ensue (oh, and losing the customer for good). Ensuring that waitstaff understands and respects these sensitivities can make a huge difference not only in protecting your Yelp rating, but in impacting the overall success of the promotion.

 

Have your own theories to why deal promotions often lead to bad Yelp reviews? We’d leave to hear about it in the comments!


EDIT: Was informed that the same individuals from the study mentioned in the beginning of this post also set out to answer “why.” Click here for their study.

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Comments

  • Great discussion. Every guest needs to be treated with respect. This includes the coupon user. As managers we can't permit "half-hearted hospitality". If the restaurant didn't wish to participate they shouldn't have signed on. The daily-deal user is already at a disadvantage, he's asked to present the deal before ordering. A server friend calls this the "kiss of death". I have worked in restaurants where the service staff refused to offer an advertised lower priced prix fixe menu. The guest had to ask for it, making him uncomfortable from the get-go. We have to train our staff to not prejudge guests or the tip that they might leave. Here's some thoughts as to why social media comments might be worse with deal users. Often the restaurant is trying out a new meal period. We experienced this the other night at dinner; a breakfast/lunch restaurant that wasn't quite ready for prime time. Other restaurants are on their last legs when they enter a coupon program and the place has lost its energy and has allowed itself to become run-down. Daily deals are an opportunity for owners to bring new guests to their restaurant. We have to then put our best foot forward.

  • Emerald,

    Thank you for sharing that story - that's definitely a factor that (for brevity) I didn't include in the post. It's definitely significant. You should warn your client - the last two weeks are usually even more crazy than the first week! One way to alleviate this crunch is to extend the redemption period a week or two past the expiration date, so diners won't be so crazed to redeem it in time. You make a good point about promoting just drinks. A couple of our clients have given us the same reasoning for why they offer "wine only" deals - it's easy on labor costs and the markup is high enough that they don't really lose money on it!

    Alyson,

    That's very true - deal sites and restaurants are becoming increasingly aware of these problems and are trying to address them in a variety of ways. Like you said, the 18% gratuity clause has greatly alleviated some of the stress associated with running a deal, and tends to select for higher quality diners anyways.

    I'm sorry you personally had to experience discrimination from your server for using a deal. If they had known that you participated on FohBoh, they would have known that you understand the restaurant industry and were a quality guest to have! I appreciate you sharing that story, as it validates the existence of this issue.

  • Thank you for bringing light to this subject Eric.  

    Deal sites are getting better about protecting both the restaurants and their wait staff by adding conditions like required reservations for redemption and the automatic inclusion of an 18% gratuity no matter the party size.  Like all conditions, these must be made apparent before the purchase of the deal, but they are a great way to prevent deal-related overload.  

    On the other hand I have experienced first hand deal discrimination.  In my situation it was very blatant and not at all due to discomfort with an operation outside of my normal price range.  It is important for managers to train their servers to treat all guests equally (especially when they already have protected tips) if not only for the return business and positive word of mouth, but mainly because it is good business and hospitable.  

  • Great blog, Eric! Recently, one of my restaurant client's Yelp page was inundated with negative reviews after they offered their first Groupon, mostly because they weren't prepared for the amount of people who bought the deal. I agree with both of your theories on why deal-diner write harsher reviews (especially them being "troll like"). One of the biggest factors that impacts restaurants versus say a massage or a personal trainer as a daily deal is that we don't require an appointment. We have next to no control over when the purchaser will redeem the deal. In most cases the purchasers choose to redeem the deal within the first week and the restaurant can feel unprepared with dozens of new guests. My client tried again with a daily deal but this time offered a discount for their beer sampler versus food, something they could control better and required minimal effort from the team. It was wildly successful!  

  • John - Thanks for your comment. I couldn't agree more. I observed this challenge as well in working FOH. It is reasonable for servers to be concerned for their tips, but one good point I've heard management tell staff is "if not for promotions driving in these customers, you'd be collecting zero in tips off of empty tables!" Having (and spreading) a positive attitude about promotion-acquired customers is step one toward providing them genuine, great service, and ultimately getting them to come back again.

    David - Thanks for sharing some first-hand perspective. Certainly some share of deal-customers fit what you're describing - they aren't a natural fit and can be uncomfortable in a new environment, which can be a tough crowd to please from the moment they walk in. I really didn't feel like the purpose of this post was to blame servers at all. After all, the emphasis here is that these particular diners have an irrational sensitivity and perception of discrimination. It's understandable for servers to act as they always do with deal customers, but I think it's important to highlight that there are additional sensitivities about these diners that deserve consideration.

    When I worked FOH at a high-end restaurant in San Francisco, one of the most useful things I learned was the fact that a certain subset of our clientele were special occasion diners who virtually never dine out at restaurants of our price point (guest average around $150/person). These diners were often very insecure and nervous about mispronouncing menu items, asking questions, table etiquette, etc. They feared and expected that the slightest misstep would result in judgment or a condescending response from "snobby" waitstaff in suits. Identifying this and taking a little extra effort to putting them at ease yielded great results in customer satisfaction that set us apart from the competition.

  • I think the answer is much more basic.  I've worked a few groupon programs on the restaurant level and have read a few of the studies.  When you stand in front of the guests during Groupon expiration week, the answer becomes obvious.

    The premise of a discount is that you are giving the guests an incentive to do something they normally wouldn't do.  In this case it is to eat at your restaurant.  They are not the guests who are drawn to your restaurant organically.  The guests that have always come in are your target market.  They like your restaurant and they are willing to pay full price.  When you offer a discount, people who would not normally eat at your restaurant pour in.  The faults they find are often simply refelctions of the preconcieved notions that kept them out of the restaurant up until that point.  This does not mean the restaurant has become worse, but that the restaurant is being reviewed by people who are not naturally drawn to it.  Their discomfort at the restaurant that is out of their comfort zone is often displaced and interpreted as "we were treated differently" (which is ironic since it is thei first experience so they can't really define "different").  This is not a customer service issue most times, but rather a customer perception issue.  Niether is good for business, but it is the price of offering one of these deals.  Let's not be so quick to place blame on the employees for not living up to unrealistic standards. 

  • Thanks for this report. It illuminates an issue that has been around the restaurant industry for years...the perception from restaurant employees, namely managers & servers, that customers with coupons are mere bargain shoppers and/or one time customers. Any good manager would train his staff to treat all customers like gold. If a coupon customer visits a restaurant for the first time, this is the best opportunity to convert them to long-term, loyal customers. Give them the same treatment you would give to your best friend or customer. Convert them into repeat customers and they will rave about you.

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