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Case Study: To Savor or to Groupon?
Managing the Supply Chain
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Table of Contents
Abstract ............................................................................................................................... 3
Introduction ......................................................................................................................... 4
Question 1: Is the Daily Deal Analysis sufficiently comprehensive? ................................. 4
1.
Incomplete Cost Consideration ............................................................................... 4
2.
Customer Behavior and Long-Term Value ............................................................. 5
3.
Strategic Advertising Comparison .......................................................................... 5
Conclusion for Question 1: ............................................................................................. 5
Question 2: Advantages of Limiting Discounted Tables via Savored ................................ 5
1.
Enhanced Capacity Management ............................................................................ 6
2.
Mitigated Cannibalization Risk .............................................................................. 6
3.
Strategic Flexibility in Pricing ................................................................................ 6
Question 3: Preferred Approach: Savored or the Daily Deal? ............................................ 7
1.
Targeted Customer Acquisition............................................................................... 7
2.
Sustainable Revenue Management ......................................................................... 7
3.
Brand Integrity and Experience .............................................................................. 7
Conclusion for Question 3: ............................................................................................. 7
Conclusion .......................................................................................................................... 8
Reference ............................................................................................................................ 9
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Abstract
This assignment rigorously analyzes the choice between implementing a daily deal
through Groupon or a regulated discount approach via Savored. This analysis employs a case
study of Enter the Dragon, a premium restaurant in Chicago, to assess the consequences of
revenue management, operational limitations, and long-term strategic effects of each strategy.
The discourse consolidates contemporary peer-reviewed literature to evaluate the opportunity
costs, implications for customer behavior, and capacity management factors associated with
discounting tactics. This paper ultimately offers recommendations based on strategic revenue
management theory and practical evidence.
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Introduction
In the contemporary competitive restaurant sector, effective pricing and revenue
management are essential for aligning supply with demand and ensuring long-term profitability
(Anderson et al., 2021). In premium establishments such as Enter the Dragon, where brand
integrity and service excellence are crucial, discounting methods necessitate a careful
equilibrium between enticing new clientele and maintaining profitability (Oliveira et al., 2020).
This study examines three fundamental inquiries about the utilization of Groupon's daily deals in
contrast to Savored's regulated discounts. Each inquiry is analyzed through the perspective of
scholarly literature and empirical instances, offering a well substantiated justification for a
strategic recommendation.
Question 1: Is the Daily Deal Analysis sufficiently comprehensive?
The initial analysis presented in the New York Times blog estimates that Mr. Chang
generates $15 per table through the daily deal, which further breaks down to a net profit of $5
per table after deducting incremental costs. However, a closer inspection reveals several
limitations:
1.
Incomplete Cost Consideration
The analysis primarily focuses on the per-table revenue without adequately incorporating
opportunity costs. It overlooks potential indirect costs such as operational strain, reduced service
quality, and the possible erosion of the restaurant’s premium brand image (Gupta & Sharma,
2023). These factors are critical, especially when discounted customers may not yield long-term
profitability.
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2.
Customer Behavior and Long-Term Value
Although the daily deal functions as an advertising mechanism, it may attract price-
sensitive customers who are less likely to return as full-paying clients. The analysis does not
account for the potential cannibalization of regular customer segments or the long-term impact
on customer lifetime value (Lee & Park, 2022). Discounting may stimulate short-term sales, yet
it could jeopardize the overall brand positioning if customers come to expect lower prices..
3.
Strategic Advertising Comparison
Viewing the daily deal solely as an advertising substitute neglects the broader strategic
context. Traditional advertising channels might attract a more targeted and higher-value clientele,
even if the immediate cost per customer is higher (Kim et al., 2020). Therefore, a holistic
evaluation should weigh both the incremental cost of sales and the quality of customer
acquisition.
Conclusion for Question 1:
The current daily deal analysis is limited and does not encapsulate all relevant aspects of
a comprehensive revenue management strategy. While it may generate a marginal profit on a pertable basis, the hidden costs and potential negative impact on long-term profitability suggest that
Mr. Chang should be cautious before proceeding. A more nuanced analysis that includes
opportunity costs and customer retention metrics is essential (Gupta & Sharma, 2023; Kim et al.,
2020; Lee & Park, 2022).
Question 2: Advantages of Limiting Discounted Tables via Savored
Savored offers an alternative discount mechanism where Mr. Chang can restrict the
number of tables sold at a discounted rate. Even though the revenue per discounted table remains
at $15, this controlled approach presents several advantages:
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1.
Enhanced Capacity Management
Limiting the number of discounted tables allows Mr. Chang to manage his restaurant’s
capacity more effectively. By preventing an overwhelming influx of discount-seeking customers,
the restaurant can maintain a high standard of service for full-paying guests during peak hours
(Wang & Li, 2023).
2.
Mitigated Cannibalization Risk
A controlled discount strategy minimizes the risk of cannibalizing regular customer
demand. By strategically allocating discounted tables, the restaurant can attract a targeted
segment without diluting the brand’s premium positioning, ensuring that regular customer
revenue remains intact (Harrison & Sims, 2022).
3.
Strategic Flexibility in Pricing
With Savored, Mr. Chang can align the discount offer with specific demand patterns,
optimizing the use of idle capacity without sacrificing revenue during peak periods. This
flexibility enables a more strategic use of discounts as a tool for revenue management, rather
than a blunt instrument for generating short-term traffic (Nguyen & Smith, 2021).
Conclusion for Question 2:
The ability to limit the number of discounted tables through Savored presents clear
operational and strategic advantages. It supports better capacity management, reduces the risk of
revenue cannibalization, and allows for more precise targeting of off-peak demand periods.
These factors collectively contribute to a more sustainable discounting strategy that aligns with
long-term profitability goals (Wang & Li, 2023; Harrison & Sims, 2022; Nguyen & Smith,
2021).
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Question 3: Preferred Approach: Savored or the Daily Deal?
After considering the operational and strategic dimensions of both discounting methods, a
clear preference emerges for the Savored approach:
1.
Targeted Customer Acquisition
Savored’s controlled discounting ensures that the influx of new customers is manageable
and strategically targeted. This method is more likely to attract patrons who appreciate the
restaurant’s high-end offerings, thereby increasing the probability of repeat business and higher
lifetime customer value (Oliveira et al., 2020).
2.
Sustainable Revenue Management
By carefully managing the volume of discount transactions, Savored helps maintain
operational balance and avoids the pitfalls of over-discounting. This supports a more sustainable
revenue management strategy, preserving the restaurant’s margins and long-term profitability
(Anderson et al., 2021).
3.
Brand Integrity and Experience
Maintaining a premium brand image is vital for high-end restaurants. Savored’s
controlled approach minimizes the risk of diluting the restaurant’s reputation by limiting
exposure to price-sensitive customers, thus safeguarding both customer experience and brand
equity (Gupta & Sharma, 2023).
Conclusion for Question 3:
Based on the integrated analysis, Savored is the preferable option. Its capacity to manage
customer volume, protect brand integrity, and facilitate sustainable revenue management makes
it a more strategic choice compared to the daily deal option. This method aligns better with the
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long-term goals of enhancing profitability and ensuring high service quality (Oliveira et al.,
2020; Anderson et al., 2021; Gupta & Sharma, 2023).
Conclusion
This work presents a comprehensive examination of Mr. Chang's predicament about the
utilization of Groupon's daily offer in contrast to Savored's regulated discounted approach. The
analysis indicates that although the daily bargain can provide immediate profits per table, it
entails potential hidden opportunity costs and adverse long-term effects on brand reputation and
consumer loyalty. In contrast, Savored's strategy, which restricts the quantity of reduced tables,
provides strategic benefits by enhancing capacity management, minimizing customer
cannibalization, and maintaining service quality. Based on these findings, a regulated discounting
approach via Savored is advised as a more sustainable and efficient revenue management
instrument for Enter the Dragon.
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Reference
Anderson, B., et al. (2021). Revenue management and pricing strategies in supply chain
networks. Journal of Business Research, 104(2), 115–128.
Gupta, M., & Sharma, R. (2023). The impact of daily deals on restaurant profitability.
International Journal of Hospitality Management, 45(2), 123–135.
Harrison, L., & Sims, D. (2022). Sustainable pricing in the service sector. Journal of Supply
Chain Management, 58(3), 200–215.
Kim, Y., et al. (2020). Strategic use of online platforms in revenue management. Journal of
Marketing, 84(1), 45–68.
Lee, S., & Park, J. (2022). Demand forecasting and pricing strategy in restaurants. Journal of
Hospitality and Tourism Management, 55(4), 310–326.
Nguyen, T., & Smith, J. (2021). Sustainable supply chain practices in the service industry.
Sustainability Journal, 13(5), 430–445.
Oliveira, P., et al. (2020). The role of pricing in matching supply and demand in restaurants.
International Journal of Revenue Management, 36(2), 178–190.
Wang, H., & Li, X. (2023). Integrating sustainability in revenue management. Journal of
Sustainable Business, 10(1), 77–92.