Case Study: Using Daily Deals to Target College Students
What’s the best way to draw college students off campus and into nearby coffee shops and stores? Andrew Eigel, owner of gaming cafe Roxx Electrocafe, believes the answer is a combination of daily deal coupons, humorous sandwich boards, and well-placed QR codes that customers can use to redeem free drinks and other specials. The Cincinnati entrepreneur pitted Groupon against LivingSocial to see which one worked better. As it turned out, he needed them both.
How did you end up running the same $10-for-$20 deal with both Groupon and LivingSocial?
[LivingSocial] approached me first and said, “We’re doing things a little differently than Groupon.” Their pay rate is different, and what they were going to offer was slightly different. I was like, “Well, let’s see what you do, let’s see what Groupon does, and if I can go with both of you, great.” The payout on both was 50/50 to start, although they both assured me that over time they would offer a greater percentage as I used them more. I seem to recall that [with] LivingSocial [you] can place ads three times a year. Groupon seems willing to do it quarterly. LivingSocial pays out [the merchant’s] half of the total coupons sold right away, and [Groupon] pays out one-third up front, one-third the second month, and one-third the third month. Of course they both wanted exclusives, but I just wanted to see how it ran before I ran any more deals in the future.
Did your deals run at the same time?
Not at the same time, but in the same business quarter. They both approached me within a few weeks of each other.
So how did they compare?
It was about equal for the amount of people who came in. It turned out that about half the people that bought the [coupons] were regulars and the other half were brand new people that had never heard of us and were like, “Hey, I’m going to U.C. [the University of Cincinnati]. This looks really awesome, let me try it out.” And of course, like everyone else who comes into our store, they were like, “Oh my God, this place is amazing,” and they fell in love with it. I’m very proud of that fact. From the total amount [of redeemed coupons] that we got, [I recognized] eight or 10 regulars, and another eight or 10 were new people.
Did that fall in line with what you were expecting?
My personal expectations for the actual raw numbers was probably about 10 percent of the  friends we currently have on Facebook. And lo and behold, we had around 45 [coupons sold].
From a business perspective, what were the differences in the terms of the deals you ran with Groupon and LivingSocial?
They both would very much like exclusives. The terms were pretty much, “You sell this many, we’ll pay you this much.” What it really came down to for me was the people they could get to. LivingSocial said, “We can get to everybody in this zip code. We’ll get them in here.” Groupon said, “We can get everyone in the [Interstate] 71/75 corridor.” They made this sort of gerrymandered area and said, “Given our demographic, this is the most likely to draw the people that you want.” They were both effective as far as that went.
The only other terms are how they pay out, and I think Groupon pays out in three portions over three months. LivingSocial pays off right away with half [of the deal price], minus fees. Groupon [funds] will keep on happening for three or four months, and LivingSocial doesn’t have quite that deal. Those are the biggest differences that I noticed. They’re both working off the same business model. Whether you’re selling chocolate or t-shirts, it’s the same model.
Are the people who bought coupons the same college-age crowd that usually visits your shop?
They were. I want to say they were all under 25, and many of them spent a good half of their $20 Groupon—at least half of that money—while they were in here for the first time. They said, “Hey, here’s my $20 Groupon. I want to do two hours of gaming, one nachos, give me a Candiccino and we’ll go from there.”
How do you typically market to the student population?
We’re on a budget, so one of the biggest ways is just street traffic. I’m trying to build that up right now. People playing Rock Band in front of the windows draws people in. It doesn’t cost us anything to be humorous with a [sandwich] board, and most people will see it. We’re also going to be pushing forward with fliers, a calendar of events, buffing up our Facebook page, and QR codes.
What specifically are you planning on doing with QR codes?
The simplest way to do it is to have a code connected to a poster that has some basic info, and then the QR code has “Tournament, Saturday, October 14!” Just basic content so it’s not cluttered and people can focus on the basic beauty of the poster. Then in the corner, there’s a little inch-and-a-half QR code that people can scan and it takes [them] to the Facebook page with all the details and the rules. Another [idea] would be to put a QR code on every 8th or 10th cup in the stack. That way we can tell people to look for the sticker at the bottom of their cups and if they get one, they can scan it and bring it back up to us for 10 percent off [their] next drink or a “Buy a fountain drink and get a free hour of gaming”-type deal.
This interview has been edited for length and clarity.