Much has been made about whether Groupon is good or bad for retailers. On the one side, one promotion might reach millions of people (slightly fewer when it’s a localized promotion), giving your business exposure to an audience you might never reach otherwise with a concrete offer that people pay for upfront, and then potentially redeem over time (or, on occasion, not at all). On the other side, accusations that after Groupon takes its slice of the transaction, the retailer is left with a bum deal, alongside the potential problem of success, where your offer does far better than you budgeted for, as Gap found out.

Well, I received a Groupon offer from a local restaurant right around the holidays last year. It was for a wine class. The offer was 3 wine classes for $30, regularly a $60 value. I bought two, and we gave it as a group gift to two other couples in our neighborhood. In late January I called to schedule our class, and was told the earliest I could book, due to the success of the Groupon, was late March. Yes, for a class that is offered around 8-10 times per month to a maximum of 16 people per class, we had to book two months out to attend.

Now, this restaurant wouldn’t go on the record as to results, but did invite me to speculate. Let me do so, based on our recent class experience. At our class, on March 31, 13 people were in attendance, 8 of which had prepaid through Groupon. The class consisted of 3 tastings (with a bonus 4^th), and none of the wines that we tasted cost more than $30 at the retail shelf, with one costing somewhere around $16 retail. One bottle managed tastings for all 13 of us, so only four bottles were opened during the class. The restaurant general manager (and main wine buyer) ran the class, which lasted from 6:30-7:30pm on a Thursday night. The class took place in the room the restaurant uses for large parties or meetings.

I’m not sure if they open a fourth bottle for every tasting, and I’m not going to count the cost of the GM’s time or the opportunity cost of the room, because I’m guessing that the room sits empty on a Thursday night if they weren’t holding classes in it (or they wouldn’t select that day for the class anyway) and the GM generally is going to be there during that time as well.

If you consider 3 bottles of wine that probably cost them $10 each, plus about $50 worth of hors d’oeuvres, with an average attendance of 13 people (our class was supposed to have 14, but had one no-show, so I’m guessing they do better than that), then their costs are about $6 per person for the class. A Groupon at $10/person, with Groupon’s take, according to the Wall Street Journal, at roughly 50%, means the restaurant is offering the deal at something pretty close to break-even, or as a very slight loss leader.

However, of the 13 of us attending, 10 stayed for dinner afterwards. Our party of six spent $200, including another bottle of wine at restaurant prices, and another party of four also stayed, let’s guess conservatively spending another $100. Plus, of the 13 people in the class, six people had never been to the restaurant before, and four of those people stayed for dinner (including two from our group). So that $300 was not only incremental business, it was exposure to people who had never considered the restaurant before (and the two in our group said they would definitely come again).

Now, I will say that the restaurant could have done a better job of facilitating the dinner add-on. In our case, we were pretty disorganized and didn’t anticipate staying for dinner. We asked when we arrived if we could get a table, and they assured us they could — but then had a couple parties linger in inconvenient places, so we didn’t get seated until 8:15pm, and only after we started making noises about leaving because it was so late. The person booking our wine class might have offered to book a reservation for us at that time, assuring us a table — and upselling, since in our case we hadn’t thought about dinner at that point.

But even with that miss, I have a feeling from the wide smile on the GM’s face, that this particular restaurant is pretty happy with their Groupon experience.

The lesson learned for me: #1, make sure the offer you’re providing is intrinsically profitable, or at a minimum has a clear path to profitability. That seems like Promotions 101 but our research shows that retailers continually struggle to identify the profitability of their promotions — many just have no idea if they made money off of an offer or not.

With Groupon taking such a large chunk of the deal, it’s tougher to come up with an offer that can take a 75% price cut and still be profitable. In the case of my restaurant experience, they chose an offer that could take that kind of hit, and even better they targeted something that offered a taste of the restaurant without providing the full experience — enticing people to come back for the full deal either that night or later on.

Perhaps because the offer itself wasn’t a loss, they didn’t feel like they had to worry about ensuring the full experience that night, which is lesson learned #2 — provide a path to a full-price experience, to ensure you get the follow-on sale. In this restaurant’s shoes, I would’ve done more to try to secure a reservation from class participants, either for that night or for a subsequent night, but even without their efforts, they still got ten out of 13 to stay last week.

So how might you apply this to a straight retail setting? For apparel retailers, you might offer a special event — exclusive access to a trunk show with drinks and hors d’oeuvres for a small fee — where the actual cost of the event is low enough that you’re not losing out on margin, but you still have an opportunity to sell things at full price either at the event or in subsequent sales. You might also consider the option of adding an offer for attendees to redeem later, like 20% off the next visit. For grocery retailers, it might be a special bakery tasting, or flower-arranging class (grocers like Whole Foods offer these kinds of things all the time, but they also have the space for it — a key requirement). Part of the value of Groupon is that you can localize to a city, so even if you’re nation-wide, you have an opportunity to roll it out over time across geography, and adjust your strategy as you go (provided Groupon is amenable).

So is Groupon ultimately a good thing or a bad thing? Like so many things, it all depends on what you make of the opportunity