We’ve regularly warned restaurateurs in our posts about the dangers of devaluing their brands by offering too many incentives and running coupons that reduce regular prices. It’s usually better to offer a value-based incentive rather than offering discounts on your price because discounts can devalue your restaurant in the minds of your customers. This phenomenon is called the Groupon effect after the leading daily deal company, Groupon. BOGO offers are the exception to that rule. However a recent report by the University of Maryland’s Business School suggests that upscale restaurants don’t suffer as much from the Groupon-type devaluation effect when they offer discounts.[1]
Gilt City not only offers a targeted platform to reach wealthy and sophisticated consumers, but offer discounts on upscale dining prices might actually incentivize upscale diners without devaluing your restaurant. Even if you still worry about the Groupon effect, Gilt City also runs other types of promotions than just discounting meals.
Gilt City is owned by Gilt Groupe, an eCommerce company that offers high-end fashion, luxury goods and home décor at discounted prices. Gilt became instantly popular and trendy by offering items like Christian Louboutin shoes at 50-percent off of regular prices and using word-of-mouth referrals to pass discounts along to friends. The company was founded in 2007 and grew amazingly fast, despite serving limited locations. In fact, the company began by marketing exclusively to the cognoscenti of New York City.
In 2010, Gilt City was founded to offer daily deal specials to for businesses like fine dining restaurants, entertainment venues, spas, salons, health clubs and resorts. Deals aren’t limited to financial incentives because upscale customers often care more about special perks and recognition than cost savings. The company currently serves national customers and residents and travelers in the cities of Atlanta, Boston, Chicago, Dallas, Houston, Los Angeles, Miami, New York, Philadelphia, San Diego, San Francisco, Seattle and Washington.
Gilt City recently raised more than $100 million for expansion, and growth plans include targeting international locales, especially in China, where more than 1,000 daily deal sites flourish. The company anticipates eventually expanding to 40 American cities in a best-case scenario. The company feels that there are only enough wealthy customers and upscale businesses to sustain the program in 40 American cities.
Gilt City doesn’t usually require upfront payments, preferring to create a custom marketing agreement on a case-by-case basis with each of its partners, where all the details of the agreement are contractually agreed to by both parties. Merchants receive a percentage of coupon sales, unless the incentives focus on nonfinancial inducements.
The editorial team at Gilt City uses a detailed, hands-on approach when crafting the offer and designing the Web copy for each restaurant. The marketing experts are more proactive in designing the marketing material than the staffs of other daily deal companies. Even the staff’s titles reflect a more calculated approach. Writers, editorial team members and customer service staff are called curators because they curate the marketing plan, much like curators at upscale galleries and museums curate prized collections. The details of how the process works include the following highlights:
Competitors for Gilt City include many copycat companies that have rushed to imitate the company’s business model and failed, but the major players include LivingSocial, Groupon and Amazon Local, which is a relatively new market where restaurants can offer unique experiences and daily deals. LivingontheCheap.com allows restaurants to advertise at standard advertising rates, and social media are good platforms for advertising proprietary specials without sharing commissions with third parties.
Google tried and abandoned its Google Offers program by incorporating it into local searches. However, the recent change that created the Alphabet parent company for Google probably heralds some changes in marketing strategies for restaurants, so restaurateurs should stay tuned for developments.
Upscale customers are usually worth more than typical restaurant diners, and Gilt City is an ideal marketing platform for fine dining establishments in the cities where the company does business. However, it’s difficult to compare cost-benefit scenarios when costs aren’t standardized or published. We suspect that getting new customers for the best restaurants provides extremely favorable cost-value benefits. If your restaurant can impress and satisfy wealthy diners, they are more likely to return and pay full price without worrying about the costs.
Upscale restaurants generally get the best results from investing their marketing dollars in upgrading their Web pages, websites and social media marketing strategies. Marketing to your existing customers generates the highest cost-value benefit ratio of any advertising strategy.
If you don’t live in one of Gilt City’s targeted cities, you can use a competitor or offer incentives through in-house marketing, Website offers and social media advertising. If you don’t like the terms of Gilt City’s contract, your restaurant might be able to use LivingSocial or Groupon without damaging its reputation, at least according the University of Maryland study.[1] Advertising independently gives restaurants more control of their offers and terms, which can be crucial for upscale restaurants.
Upscale restaurants need to consider their reputations, audience, content language and marketing strategies even more carefully than fast food or fast casual restaurants. Targeting affluent customers requires using refined and tasteful marketing, and Gilt City seems to offer an excruciatingly correct approach.
We like the company’s comprehensive approach to marketing and the ability to offer other kinds of incentives than just discounts. Using dedicated teams of “curators” seems like a clever way to set the tone for fine dining restaurant marketing. Social media marketing works for all types of restaurants, and Gilt City’s social media program offers benefits that transcend ordinary daily deals results.
Gilt City suffered some hits from slowdowns in the market and has yet to earn a profit from its recent capitalization, so we’re not entirely sure that the company has as bright a future as its approach promises. We don’t like the fact that the service is only available in limited U.S. cities with no plans for a major expansion in the United States.
If you want a turnkey approach to offering incentives to the one-percenters in major metropolitan markets, Gilt City seems to fulfill demanding criteria for marketing fine dining establishments to wealthy audiences. However, don’t dismiss other marketing options where you can educate your customers, foster loyalty and create your own marketing dynamic that’s based on a unique selling proposition, culinary excellence, exacting service standards and clever Internet marketing strategies.
[1] Fast Casual: Why upscale, newer brands can escape negative Groupon effect