One Last Party for Drew's Eatery after Disastrous Discount Deals

Also, the owner mentioned utilising many different discount/coupon programs. Groupon may stand out because it's kind of emblematic, but there's no reason to think from anything that has been said that it was the majority of their coupon activity. Is there?

  Their menu basically consists of expensive vegan
  hot-dogs and fairly generic sandwiches, which is
  a tough sell in Chicago when you have some very
  good food around for very cheap.

An interesting trend I've noticed with Groupon is that, at least in Chicago, it's a great way to kill your Yelp rating. The sudden surge in business tends to be much more than the business is really prepared to handle, and everything naturally suffers when that happens. Particularly in Groupon's hometown, where their high market penetration means they act as the engine behind a veritable tsunami of deal chasers that roves around the city, randomly swamping unsuspecting mom-and-pops and neighborhood holes-in-the-wall.

I used to be a regular customer at Drew's. But I have a habit of ceasing to go to restaurants for a month or two when I hear they did a Groupon. (Not out of protest or anything. It's just that flooding a place with Grouponers tends to make it a less pleasant place to eat.) I'm definitely not the only person I knew with that habit.

My cheapest (and not frugal, actually cheap skates) friends are the ones who would jump through all sorts of hoops for a dollar. They are also the ones I'd never want as customers. It's odd to me that businesses don't recognize this.

I believe the example they used in the podcast was sky diving. Lots of possibilities for retention ("get a rebate on your next jump if you sign up for membership") and up/cross-selling ("we have t-shirts").

You're over simplifying it. Just about every merchant can understand that they are giving up a dollar for a quarter. They get that. What they don't understand, and what the hard sell is, is customer retention. Being sold on repeat customers that will drive revenues in the long term based off of a one-time loss lead (advertising cost).

You have to realize that the fault lies with you and then you have to act on that realization. Seems he realized things were going sour, but his solution was to jump in with the daily deals sites, instead of fixing the real problem with his business.

You can use Groupon in one of two ways.

You can sell off excess inventory. In the case of a restaurant, this may mean running a "breakfast only" deal if most of your clientele comes in for lunch and dinner. Or you can run a "dinner only" if most of your customers are a breakfast and lunch crowd. There are other creative ways and I have truly seen "Groupon done well" in this way. You focus the Groupon customers to fill gaps.

The second way you can use Groupon is to temporarily keep your failing business afloat. If this is all you do, your business will fail. It'll just take longer. Groupon is like a credit card. They'll give you cash fast and you better use that cash to fix whatever is wrong with your business. If you simply sit on your ass and do daily deals, you're just delaying the inevitable. Don't blame Groupon, blame yourself for not fixing your business.