Friday, August 6, 2010

If Your OpenTable Ain't Broke...


Hope all is well with you and you're looking forward to an insanely good weekend...  I'm counting down the seconds to seeing R. (hi!) Saturday morning and hopefully seeing K. (hello!) who is moving back to Chicago with her family.

In my last post, I talked about businesses knowing limits in search of repeat customer heaven.  While we can't foresee every variable, it's good to have an understanding of what our core competencies are, who we serve, why they come back and how all of that translates to business strategy, sales, marketing...  everything, in other words.

As I said, if you know what you're good at and you make good money doing it, why would it be that you'd copy what your neighbors or competitors are doing?  Which brings me to OpenTable.  If you've not heard of it, it provides online reservations for diners and a guest management solution for restaurants.  They released their 2Q results released on Tuesday.  Here are some choice numbers:
  • Revenue increased by $22.5 Million, or 37%, over 2Q 2009.
  • Their installed restaurants grew by 27% and their Seated Diners grew by 52% over 2Q 2009.
OpenTable's growth was fueled by both North American as well as its International business.  In other words, in an industry which is particularly hard hit by this recession and amidst a debt crisis in Europe, this company did extremely well.  Some numbers, huh?

Before you shrug and move onto someone else's blog consider this: on the heels of that positive and impressive report, they launched OpenTable Spotlight (here) which is a half-off meal deal to New York and Boston diners (for now) assuming that enough of them buy the offer.  Hmm...  sounds familiar...  Why does that ring a bell...  Oh right...  Groupon!

[I mentioned Groupon in my last post with no notion I'd be mentioning them again today.  I'm just as surprised as you might be.]

Why would OpenTable do this?  We all can guess at the basic answer: it's that they want to kill Groupon out of the restaurant portion of its business.  It makes sense: no one should ever stick their heads in the sand and pretend or wish their competition didn't exist.  And Groupon is definitely competition which OpenTable would love to kill.

My question of "why" has nothing to do with the basic answer.  My question of "why" is really addressing what the core of the OpenTable product is versus the core of the Groupon product.  OpenTable is ostensibly about the diner but really about restaurant operations: reservation management, table management, guest management and marketing.

In other words, OpenTable is a tool to help restaurants build/maintain relationships with customers at different touchpoints: pre service, during service and after servce.  OpenTable is designed for longevity and positive customer experience.  Oh sure, it's a lead generation tool for a restaurant and a diner may visit once and never return for whatever reason.  That said, the backoffice engine is designed to be more than "Table for 2 at 8pm."

Let's contrast OpenTable with Groupon.  Groupon is a group buying initiative with coupon only activated after a minimum number of people agree to buy it.  It is a transactional, one and done engine just like Catalina marketing.  Companies interested in casting the net wide in the hunt for new faces can use Groupon as one of the tools to do so.  And that's all Groupon does: it helps to case the net wide (potentially).  I won't speak to how much cannibalizing may happen but the smart money says it happens!

As we learned in this article and my last post, Groupon does not help with operations.  And in fairness to them, that's not what they offer.  How a business manages the increase in volume due to Groupon offer (staff, hours, forecasting, etc.) is entirely up to them.  How business limits an offer should be based on what they know their resources to be and not on theoretical future repeat business.  And let's also remember that for many, Groupon is a risky bet because the offers aren't profitable in and of themselves in many cases.

So, let's go back to the "why" question.  OpenTable's function is to help with operations management and relationship management.  It's designed for good resource management and longevity.  And, based on those 2Q numbers, it's doing a good job of it.  OpenTable's strategic advantage and key differentiator is that it can withstand the likes of Groupon because of its inherent nature not in spite of it.

If it ain't broke, don't fix it.  This moves makes OpenTable look scared when they don't need to be.  They should keep enhancing what they're good at to differentiate further from Groupon instead of doing things like Groupon.  OpenTable just blinked first.

Thoughts?  Let me know!


Parissa Behnia
Idea Chef

1 comment:

  1. Open Table is a great CRM tool that should be benchmarked by other Retail operations.

    Sometimes being first is a point of differentiation. People playing catch-up try something different, but being first always meant doing something different.