Case Study: To Savor or To Groupon
BUSI 740: Managing the Supply Chain
School of Business, Liberty University, Lynchburg, VA
Dr. Thomas Scotts
October 10th, 2025
Case Study: To Savor or To Groupon 1
Introduction
Mr. Chang, owner of Enter the Dragon restaurant, is evaluating two potential
promotional options, one by Groupon, a daily deal promotion, or the other by Savored, a
discount program offered through their restaurant reservation network. While the daily deal
option through Groupon could attract significant customer attention and increase visibility, it
also offers steep discounts that could severely impact the restaurant’s profit margins. Whereas
the discount program offered through Savored, could strategically use discounts by targeting
slower business periods, which could help the restaurant generate additional revenue from
tables that may otherwise remain empty. This study will focus on analyzing the costs associated
with acquiring new customers and determining which promotional option will be the most
effective for generating maximum profits and operating efficiently within the restaurant
industry.
Assume a variable cost of $10 per table and an average spending of $60 per table. With the
daily deal ($60 for $30 coupon), Groupon provides Mr. Chang with a revenue of $15 per
table. The analysis provided in the New York Times blog indicates that Mr. Chang makes
money ($5 per table) through the daily deal (rather than incurring advertising expenses).
Do you think the analysis has included all aspects that need to be considered? Should Mr.
Chang go ahead with the daily deal given that he can advertise while making a little bit of
money per coupon?
Given the information above, if customers dine at Enter the Dragon using the Groupon
deal that offers $60.00 worth of food for the price of $30.00, each Groupon that is redeemed
will generate $15.00 in revenue for the restaurant. The variable cost per table is $10.00,
resulting in a $5.00 profit per Groupon. As highlighted in the New Yort Times blog, Mr. Chang
does gain some marketing exposure and a small profit from participating in Groupon
promotions; however, this potential advantage is offset by the loss of full-paying customers who
Case Study: To Savor or To Groupon 2
could have occupied the same tables. When a table is booked through Groupon, it prevents
another customer from spending the full cost, $60.00, reducing profit by $50.00 per table
($60.00 potential - $10 cost).
Statistics show that demand from repeat customers follows a normal distribution, with
an average of sixty and a standard deviation of thirty. Based on the data provided, profits will
total approximately $2,875.00 for the remaining ninety tables, with ten tables yielding $50.00 in
profit. However, since Groupon customers replaced Enter the Dragon’s potential regular
customers, overall revenue decreased. When fifty tables are filled using Groupon, the total
profits decreased by $567.00, but, regardless of the reduction in profit, Enter the Dragon
appears to be busier, with only 7.6 empty tables instead of 41.3 empty tables without Groupon
participation.
Therefore, while Groupon effectively increased the restaurants’ customer traffic and
visibility, however that does not always equal an increase in profitability. Increased customers to
the restaurant come at a cost of lower margins and lost profit from full-paying customers
(Chopra, 2019; Lee, 2017).
With Savored, Mr. Chang can limit the number of tables he allows for the discount price.
Assuming he makes the same revenue with Savored per discounted table as the daily deal
($15), do you think the ability to limit the number of tables at a discount has any
advantages?
By strategically using Savored, Mr. Chang can manage his discounts more effectively,
limiting the number of tables available at a reduced price (Chopra 2019). After careful analysis,
the best approach would be to reserve two tables for Savored customers, if all other conditions
remain unchanged and each Savored reservation generates $15.00 per day. As Mr. Chang
increases the amount of tables dedicated to his Savored Reservations, his profit margins may
begin to rise.
Case Study: To Savor or To Groupon 3
When used correctly to balance the number to discounted tables, Savored can help Mr. Chang
to maximize his overall revenues in any scenario (Lozic et al., 2021). Furthermore, by lowering
the discount on table reservations, through Savored, from 75% to 25%, Savored becomes a
more profitable option, which allows Mr. Chang the ability to increase the number of reserved
tables while maintaining a stronger profit margin and sustaining long-term business growth.
Would you prefer to use Savored or the daily deal? Why?
After careful consideration of both options, I would choose Savored over Groupon
because it offers great efficiency and control. By utilizing Savored, Mr. Chang can regulate the
number of tables offered at a discounted rate, which allows him to maintain profitability while
attracting new patrons (Chopra, 2019). Unlike Groupon, which could negatively affect the
restaurant by discouraging loyalty, Savored is the more sustainable strategy that favors
fullpaying patrons. This option can also be used consistently to Enter the Dragon to sustain a
steady flow of patrons and increase the restaurants’ revenue without deep discounts on the
meals. Implementing a limit on the discounted tables helps draw in new customers, while
protecting the business’ profit margins, resulting in a more effective and stable business model
(Cia et al., 2018; Lee & Hwang, 2016). Furthermore, research by Ren (2020) suggests that daily
deal promotions, such as with Groupon, can lead to a decline in customer satisfaction and long-
term loyalty, further supporting that Savored is a much more advantageous option.
Conclusion
After evaluating both promotional options, Savored emerges as the superior choice for
Enter the Dragon. While Groupon may increase visibility and short-term customer volume, its
steep discounts significantly reduce profit margins and risk discouraging loyal, full-paying
patrons. Savored, however, offers greater control and sustainability by allowing Mr. Chang to
manage how many tables are reserved at the discounted rate, and when they are available. This
strategic flexibility allows Mr. Chang to target slower business periods, maximizing table
Case Study: To Savor or To Groupon 4
utilization, and maintaining profitability. By limiting the number of discounted reservations and
setting moderate discounts, Enter the Dragon can attract new customers while protecting their
long-standing patrons, profit margins, which will result in a more stable and profitable business.
References
Cao, Z., Hui, K. L., & Xu, H. (2018). When discounts hurt sales: The case of daily-deal markets.
Information Systems Research, 29(3), 567-591. https://doi.org/10.1287/isre.2017.0772
Chopra, S. (2018). Supply Chain Management: Strategy, Planning, and Operation (7th ed.).
Pearson Education (US). https://libertyonline.vitalsource.com/books/9780134732459
Lee, I. (2017). A study of the effect of social shopping deals on online reviews. Industrial
Management & Data Systems (2017) 117 (10): 2227–2240.
https://doi.org/10.1108/IMDS-09-2016-0378
Lozic, J., Cikovic, K. F., & Smoljic, M. (2021). Financial analysis of Groupon platform:
Saturation at industry of coupon market. Economic and Social Development: Book of
Proceedings, 186-194.
Ren, J. (2020). Effects of Reputation on Daily Deal Promotions: Evidence from
Groupon. Mathematical Problems in Engineering, 2020(1).
https://doi.org/10.1155/2020/8855783
