Don't sell your soul to the discount devil
February 25th, 2010 • Posted by Bill Bice • Permalink
Or, why Groupon sucks…
We all love to get great deals. But it's one thing to take advantage of them personally, and another entirely to take your spa down the slippery slope of discount oblivion. It can be tempting, especially when you see your competitors doing it, to start throwing some ridiculous discounts out into the marketplace.
The current craze in discounting devils are new websites like Groupon and BuyWithMe. They sign up a small spa, restaurant, etc. to sell coupons at a steep discount:
Balani Custom Clothiers Inc., a Chicago men's suit and shirt tailor, offered a promotion through Groupon where, for one day in October, consumers could spend $95 on a gift certificate from the tailor shop valued at $225 that's redeemable for up to one year. But at least 50 cards needed to be purchased for any to become valid … "We were all over Twitter and Facebook that day," says owner Sonny Balani … Still, Balani paid a hefty price for the exposure—50% of the earnings generated from the promotion went to Groupon—which means the tailor received just $47.50 per gift certificate sold. —Wall Street Journal
It's great for exposure if the deal is really good, but it also stays out there forever. Every future client entertaining coming to your spa will know that you're willing to sell your services for dirt cheap. Why should they pay the full price that your services are worth? Discounts only work in one direction and only from some established value. Once you are exposed as a discount seller, you have lowered the value of your brand and begun your slide. Sites like Groupon feed on nice local brands like the devil. You get exposure, they get your soul.
Instead, use intelligent discounting that rewards loyal clients or is likely to generate repeat clientele. BOGOs are one of my favorite techniques: you sell your services at full price, with the added bonus of an additional, small gift certificate which generates an additional visit to your spa (and an almost guaranteed upsell).
• Trackback • Posted in Group Deals, Spa Marketing
Hi,
Thanks for the reminder and the warning. When Groupon first started calling me and I heard their deal, it was easy to flat out refuse. But as I receive their email deals daily and watch "Everybody" signing up I've started to waiver. Thanks for the reminder that unless you want to give it away, don't!
Nicole G.
Owner, Chill Massage Therapy & Modern Apothecary
Seattle, WA
A very slippery slope indeed. We often get tempted as we are losing a ton of market share to the Wal-Mart of Massage with their $39 campaign. It can be tempting, but in general, I agree it is much better to retain your brand. Offer a special on something you don’t always offer. 99% of our specials are like this. For example, we offer a first time customer massage at $10 off our regular price for 50 minutes. Most of our massages are 60 minutes. Out of thousands of bookings, not one person asking for the discount has equated the “discounted” massage with actually being higher priced per minute than if they just ordered off the menu. All they know is it is $10 cheaper. We retain our brand and dignity by not baiting people with $39. We then offer a superior experience and then have them hooked. I have even went as far as to run a campaign to tell them to go to the discount place and when they are still hurting, come to us and we will give them $39 off an extended massage with a "Massage-Mart" receipt.
I agree. We feel the pressure to lower our regular prices and I heard the same thing from a medical spa recently. "Maybe we need to lower our prices." There has always been the "discount" salon and spas out there along with the more upscale shops. There is a reason why there is a distinction. If we are not a "discount" establishment, we must resist the urge to make our prices the same as them. Doing so would lower the value of what we have worked so hard to become. We still have all the costs of the higher end decor, products and advertising. We need to stand against this urge because when one fine establishment buckles, it affects all those in that area and it is not good for any of us in the final analysis.
@Mark — You have a great point. We see many top spas offering "mini-treatments" during off peak times during the week instead of discounting their regular priced treatments. This way the per-minute revenue is maintained.
Another great tactic is packaging several treatments and a product with a reduced price. While technically this is discounting, if you're locking up a resource for 2 hours with a single customer, it can be very worthwhile.
I am the owner of Balani Custom, the company quoted in the Journal. I thought I would give my feedback as I experienced the Groupon first hand.
Doing something like a Groupon should involve some analysis. With us, we decided to do it for several reasons:
This all said, I think you need to take a hard look at your individual business model and decide accordingly what marketing inititives work best.
Hope my feedback is helpful!
Sonny Balani
Balani Custom
Well, I must say, "They got me." I am scheduled to have a discount offered at the end of March, beginning of April. After reading this posting, I am surely going to call to cancel that "discount." I had been contemplating canceling for a couple of weeks now, but this just confirms my thoughts. You only get about 25% of what your service is worth and ultimately, it's not worth it!
Thanks, SpaBoom!
SpaFinder Deal Days are just as bad. Sorry, I know you all are partners… but advertising the heck out of $50 for services that normally go for $145 is a huge loss to the spa. And some of those people are just coupon hoppers. The Groupon business model reminds me kind of like a Tupperware or a Pampered Chef party where the hostess tells you all the goodies your friend is getting because she asked you to come over her house and gently coax you into buying that $15 spatula = it's the best! It feels weird. It is not right… it rings "false" to your friends in the group and if the spa is getting no money… service will start to decline. Good idea to put this out in the open!
Thank you for posting this important subject. I've almost signed up a couple of times. About a year ago, I emailed Groupon to tell them about my frustration with this issue. I made the point that it is indeed a slippery slope. It cheapens our services and the clients who bought in can go on to the next deals at different spas on a regular basis. So you don't necessarily retain that client. Unfortunately there is a trend and I feel that it's creating a different culture in the spa service industry. My spa is about to close in a couple of months. There are many factors, but the discount issue is a factor.
I do not think that high end spas should be competing with Massage Envy, Hand and Stone, etc. If you look closer, their proposition and focus are very different. If you start lowering your price you dilute your brand for sure. While people may go to value/membership based places for a regular massage therapy treatment they still need to indulge and treat themselves to a wide rage menu of services at a high end spa. Yes, there is a trend and people now discovered the accessibility of what was used to once a year indulgent experience. So only the strongest will survive on the high end spa market.
We just need to further differentiate our places from theirs because they are trying to position themselves in the market as "just like the high end spa, but cheaper," and that is far from the differences! So really we all need to further our distance from them — and you don't do that by lowering your prices anywhere NEAR to their prices or tactics!
I did a promotion last summer with a local radio station, and I feel like I really sold my soul to a person more evil than the devil… if such an individual should exist. They sold my service for 50% off of what I normally charge, and I got air time and tips. I've learned my lesson. I will promote my business, from the inside out. In my opinion these tactics are not worth the headache they bring about.
Interesting points raised here. I agree and disagree. Spa Finder's Deals Week and Groupon can be great tools for marketing your business. IF the goal is to drive new business leads, then a spa or medical spa must remember to turn this into a good opportunity to upsell, cross sell and create a relationship based on a great experience. One treatment, one time is not enough to establish a relationship. What are you doing during the treatment? Are you listening and providing solutions? How are you encouraging your clients to come back? Was the service and results so amazing that you now have a loyal client? Why should they return to your spa or medical spa verses another?
I'm not an advocate of promoting your business on price alone. However, offering special promotions is intended to excite your target audience and create a sense of urgency.
The two marketing vehicle examples mentioned are both professional organizations. We're not talking about cheap looking coupons packs or fliers here (it is important to align your brand with similar quality brands). Plus, these promotions are available for a very short period of time. Another plus, exclusivity.
The vehicles you decide to put in your marketing tool kit are just that: tools! It's your unique selling position, team, service quality and memorable experiences that create long term customer who come back and refer you to others… regardless of how they came to know your business in the first place. Food for thought.
The Groupon business model is proliferating everywhere and many businesses think they need to jump on because "everyone" is doing it and for some industries, it probably is a great way to market a business. But let's face it, this is a business model that works well in a poor economy because the consumer is looking for a deal and business owners are desperate to do anything to keep their doors open. This business model also helps businesses who have access to cheap, (undocumented) labor and can handle the revenue loss better than the business owner who pays a decent, living wage and offers employees and clients a safe, clean work environment.
There is an interesting thread on the Groupon Website discussion board about whether Groupon can kill a small business rather than help it. Many business owners who have signed on to Groupon relate stories of being unprepared for the onslaught of customers and ultimately suffer from bad reviews on Groupon because they couldn't deliver the goods. Is it worth the risk?
As salon and spa owners, we all know that most people who take advantage of huge discounts are 1-time-only clients. Our best clients are those who value what we have to offer and are willing to pay for it. These clients are our best source for referrals and we can easily reward our best clients for referring new clients to us. I agree with the position that participating in a program that relies on ridiculous discounts will hurt you in the long run. It erodes your pricing structure and image.
There are so many other ways to promote your business to get around the Groupon faze. As the economy improves, businesses who use Groupon-like-advertising will still be in bad shape and their clients will be looking for a better experience. Those of us who have weathered this recession and resisted the temptation to offer ridiculous deals will bounce back quicker and stronger. Business models like Groupon will start to shut down because no one will need them! Hang in there!
Whether we like it or not, sites like Groupon are here to stay. People love a bargain during the good times and the bad times. The only way I can envision Groupon going bust is if business owners wake up to the ripoff that these types of sites really are and refuse to participate. Until then, I am expecting to see Groupon promotions from many of my competitors.
I spoke to someone from Groupon after I saw Groupon promotions from Bliss and the Elizabeth Arden Red Door spas. I figured that if the heavyweights of our industry are doing it there must some value to these promotions. Ultimately I decided it wasn't worth it for my business and would rather focus my resources in promoting to our existing customer base. I also found it really insulting that Groupon would have the nerve to charge a 3% credit card processing fee when they're already taking 50% of the sales.
I am a Groupon employee and would like to write a few quick points regarding this post and subsequent comments. At Groupon we work really hard to help our business customers, so it's great to see an open discussion of these topics. However, we respectfully disagree with some of the points made above:
In addition, the one-time, one-day-only nature of our deals does not condition people to expect consistent discounts from one specific business. In fact, it is the opposite — when people see a Groupon they know they have to act quickly in order to take advantage of an unbeatable opportunity.
A business' goals when running a Groupon are essentially the same as those with other marketing channels: get new customers in the door, after which they strive to give them a great experience and convert them into repeat business. Groupon, in addition, has big advantages — it is highly trackable, requires no upfront investment and results in a great deal of media exposure and word-of-mouth.
Thank you for the opportunity to post and add to the discussion. Hopefully this helps, but feel free to let us know if we can answer other questions. Our site for businesses, GrouponWorks, has a lot of information and case studies that talk to the points made above.
Thanks,
David Rangel
I strongly disagree with Mr. Rangel. As business owners, many of us have looked at Groupon (and similar business models) with great detail because we are always looking for effective ways to market our business. In my research, I came across numerous posts on the internet by "serial" Grouponites, who are not interested in finding a salon for the long term. They freely admit that they no longer go to their regular stylist because they can get their hair done for half-price at other establishments with Groupon deals. Some posters admit they would never be able to afford the salons and spas they visited with Groupon.
Now, I realize that these comments are anecdotal, but it forced me to think long and hard whether Groupon-like advertising was right for my salon and spa business. How many of these people are visiting my salon because they could not afford it otherwise and does this mean there is no opportunity to upsell beyond a $15 brow wax? If I do a Groupon and sell 50-100, 1/2-off services, how am I going to pay my employees their commission? I can't really ask them to work for free! How do other salons afford this? Do they give Groupon people to their junior stylist or therapist (who they are paying hourly) and hope they can handle the influx of people? Will the Groupon client write a bad review if the junior stylist doesn't meet their expectations? And the most important question: If you limit the Groupon deal to new clients, how will your loyal clients feel? I don't know about you, but if my loyal clients saw that I was offering a Groupon Deal for 1/2-off, they wouldn't be happy. Conversely, if the Groupon deal was open to everyone, how many of our regular, paying clients would buy-in? OUCH!
In my view, Groupon is better suited for a restaurant or coffee shop where there is a better opportunity to upsell and the employee is paid hourly (not commission). Unfortunately, I am seeing many "upscale" salons and spas jumping on the bandwagon. I recently saw a struggling competitor succumb to a ridiculously discounted group buying deal. To me, in this industry, it is a desperation tactic. Unfortunately, it is dragging all of us down by eroding our prices and changing consumer behavior. Small businesses will take longer to recover in this recession and will delay hiring new staff while they try to recover their pricing structure. We might hold off buying new equipment or making capital improvements. Groupon-like businesses are not helping the recovery, they are delaying it. I also find it interesting that Groupon employees are combing through the internet and replying to discussion boards to defend their business model.
Discount sites like Groupon are sure to fail because their model preys on desperate businesses. Groupon may be profitable, but it simply isn't sustainable. They persuade desperate businesses to offer steep discounts, and then take half the face value of any coupons sold. The business is left with a loss, and Groupon profits by doing nothing more than taking advantage of one's desperation. These leeches can't fail soon enough for me.
As a restaurant owner, I used to think that Groupon *might* work for a spa or similar business. You have the advantage of scheduling appointments, which could help you to space out these losses. Restaurants risk losing regular business while being inundated with these one-time visitors. Up-selling is unrealistic, as most coupon users are total cheapskates. After reading these comments, it seems pretty clear that Groupon doesn't work for any industry.
It is a matter of time for the state Attorney Generals to come down hard and fast on these group buying sites and regulate them according to existing law. The model is somewhat new you need to educate your political leaders and law enforcement authorities now.
It is immoral to accept money for services you could never provide. Any business that acquires more volume at a discount than they can realistically support is stealing from the consumer. You didn't earn money by assisting the breakage of coupons after you have already been paid up front in good faith.
I'm all for youth entrepreneurs becoming successful at innovating the world. But it is laughable when 20 something or 30-ish dot-com youth consults the brick and mortar world with a .net client acquisition model. What long term proven track record does Andrew Mason have advising aircraft training schools to day spas to fine dining about the economics and perception behind radical client acquisition plans that give loss leader a whole new meaning? His ideas all sound great for a dot-com robot to serve up coupon codes and reveal a dot-com deal of the day… oh… but that is Woot.com.
Every business owner should begin a personal letter writing campaign to their state attorney generals to ask they enforce strict compliance of the law in relation to these business and their marketing client businesses. It is unfair for your business to play by the rules and allow group buying sites to "wink-wink" encourage your competitors to skirt the gift certificate laws, deceive customer interpretation of purchases in relation to the laws, avoid paying sales tax revenues if applicable. These sites could easily function within the rules the rest of us follow but then the advertiser would not make the aggressive offers like the tailor above. Someone should ask the tailor who will break the law (as described in the WSJ by expiring his certificates in one year) if he would have provided the same hefty discount if he was in open compliance with state laws. These group sites need SEXY discounts that businesses will only offer with lots of caveats and unlawful restrictions. Some states can fine you for even posting an invalid expiration date in the offer.
I too find it interesting that Groupon employees are combing through the internet and replying to discussion boards to defend their business model. I bet these are more 20 something know nothing marketing consultants that have never had their financial a$$ on the line like those of us that need to drive in million dollar+ yearly sales out of our little businesses just to keep 8-10 American workers employed and paying taxes. They have ZERO skin in the game. You are a fool to listen to them and their enticement to join the race to the price point bottom.
Someone ought to call out the businesses who have oversold capacity. That is theft in my book. These group buying consultants will generally admit each sale is intended to be a loss leader. What did you think? You were going to make it up in volume???
Edward — The key is that Groupon is not selling gift certificates, but selling coupons. Coupons can have terms and conditions, and expiration dates. Just open up your local Clipper Magazine for an example of extreme terms and expiration dates on coupons. Res
I have been reading your posts and I am interested. Although I love a great deal, I am not a serial coupon chaser! I am a 29 year old female. I attended an established college and earn a degree. I work full time. I am attractive, intelligent, I love to spend money and have fun! I am the customer your company wants.
I love Groupon. As a consumer, I tend to get stuck in a rut. I get my hair done at the same salon (even if I am not thrilled with it), I always end up eating out at the same three or four establishments, I do the same weekend activities with my friends…You get the point.
Everyday when I get my daily deal email, I get a secret thrill (as lame as it may appear, I love it!). I truly look forward to it. I have been buying Groupons for the last six months. In that short time, I have been to a new salon (which I have been back to), and eaten at four NEW restaurants (two of which I have returned to). As a Groupon lover, I also spread the word to my friends. I have been a walking ad for the salon and for Groupon. When people ask me where I got my hair cut, I go into the whole story! I believe that Groupon gets me in the door of new places. It is up to the individual establishment to bring me back. Just my 2 cents!
Brittany — you are the client that all of us want, but unfortunately, you are the Groupon user that is the exception, not the norm. Salon and spa owners who have been in business for any length of time know from experience that most people who take advantage of heavily discounted coupons are usually not repeat clients. Offering discounts to prospective new clients is a marketing tactic that can be effective but savvy business owners have to walk a fine line between offering too great of a discount (attracting only serial coupon shoppers and cheapening their image) and offering too little discount and not attracting anyone! The issue with Groupon (and similar sites) is that they have bypassed effective discount strategies that the business owner might consider and have taken the concept to a dangerous, thoughtless, new low that should make all business owners cringe. They are the Walmart of discount coupons. Brittany, since you are "interested" in this topic, go on the Groupon discussion board and read what your fellow Grouponites write about salon and spa businesses. They complain if they can't get an appointment the next day, (without considering that 2000 deals were sold the day before). They complain that they can't get an appointment on certain days (not realizing that the business might have to keep certain days and hours open for their "paying" clients.) They complain that their $25 manicure/pedicure deal was "nothing special" (what did they expect for that price?) They complain that their therapist did not speak English. They complain that that can't swap services. You should help Groupon out by writing your glowing review on their website! They could use some positive press. In fact, you are the EXACT demographic that Groupon uses to sell their concept to businesses…young, single, college educated, female, attractive savvy shopper. (Hmm… maybe Groupon should hire you for PR?!)
As I teach via tips and online, before using Groupon, you must FIRST:
…have your expenses (especially compensation) fixed. If you are one of the few still trying to survive by paying your staff more than yourself (50%), then you must work out a deal with them to compensate.
You CANNOT lose money on a client that is most likely NOT to reschedule due to them being on Groupons list and getting a different spa deal EVERY week.
SECOND: Do you have systems in place?
If your front desk person is an "order taker" without the ability to offer additional services (upsell/add-on), collect emails to build your list OR offer over-the-top WOW service, don't bring more people into your spa to see how mediocre you are (sorry to sound harsh, but this is how it is).
Likewise, if your therapists are "massage/facial robots" without meeting clients needs, providing personal improvement plans and the ability to SELL PACKAGES AND PRODUCTS, Groupon will kill your business.
NOW… IF you've trained your staff via systems and they're a Wonder Crew (first, good for you! You're one in a million!) THEN you can use Groupon for new clients, but follow these steps:
You can offer things that ADD VALUE but don't cost much, therefore, when discounting you don't "feel it" as much, and the client still gets the added value.
i.e. offer time in the steam room or sauna. Perhaps a paraffin dip. An extra serum application or quick waxing. So instead of offering an $80 facial for $40 (and you get $20), you can offer a $160 facial for $80 (and get $40).
This could be a discount for their second appt. (but now you're into the "discounting" mess) or smaller gift certificates to use on future services.
PLEASE feel free to email if you'd like more clarification.
"who loves ya"
–Christopher
I have recently started buying daily deal coupons, and while I do love the opportunity to get discounted services, as a former member of the spa industry, I do see the downsides for the spa.
First of all, from the point of view of the potential client, purchasing daily deals is great. I am a frequent spa goer, but I am extremely picky when it comes to what services I get, the products that are used, and the overall ambiance and practices of the spa. I will not get a facial at a spa if I am not familiar with the products they use. So in my case, going to a new spa is a big deal, and it takes a lot for me to be willing to pay a large amount of money for a spa experience that I may regret. I recently purchased a daily deal (not from groupon) at a spa that I had previously wanted to visit, but at the time, my budget made me hesitant to pay $150 in an unfamiliar place. The daily deal I purchased gave me the exact same service for $75. So now my risk factor has been cut in half. I will definitely be buying more deals like this.
Now, from the Guest services side, deals like this could definitely be a nightmare. Especially in a spa, where any discounted service means that not only is the spa getting less money, so is the technician. Daily deal sites sell hundreds of discounted spa services, so the backlash from techs that are doing the full service for half the pay would be horrendous. The only way daily discounts are actually beneficial to the spa is if they produce repeat customers, because that is the only way the cost of acquiring those customers will be paid off.
In the end, getting new customers in the door is the most important step in a spa's customer retention process — daily deal sites accomplish this. After that, it is up to the spa to provide a memorable experience for guests that will keep them coming back.
The small biz market will soon reject Groupon's main value proposition: Valuable new customers. But not before VC's make their money and founders exit. As Restaurant.com learned years ago in its early stages, local merchants had limited appetite for what amounts to a new spin on the "loss leader" approach to customer acquisition.
And here's why: Customers become conditioned to expect deals that retailers cannot actually afford to give. Bottom line: New customers (that the retailer can actually make a profit from) don't actually appear.
I'm surprised that we're not talking more about what we already know about these kinds of businesses elsewhere. Great job, Spaboomblog! Some smart retailers have commented.
You all said it all. I am struggling with this Groupon situation and I just can't see how this would help my business, other than the mailing list it could generate and exposure. But seriously how are we to pay our therapists and estheticians? How do we know they will come back when the next day they have another spa "deal" in their inbox. I wish this would come out more and expose groupon for the raping and pillaging they are committing! Thank you for "outing" them! I appreciate that there are people who aren't taking the bait! Hold out folks! And spread the word–GROUPON SUCKS!
I fell victim to the Groupon scam a few months ago. I am in a business with an extremely high markup, so even only getting 25% I am breaking even at worst. I just want to say that through my experience, the people who have redeemed the Groupons at my store are: 1) Illiterate; 2) Rude; 3) Cheap; and 4) Ignorant. I have gained maybe 1 new customer from the hundreds that redeemed the Groupon. Most are just cheapskates looking to hit and run a new business. Word to the wise, work on marketing to your current customers, and getting the word out about your business in your community. Everyone wants something for nothing now a days.
Sites like Groupon are fads. You know, fads like the hula hoop, Crocs, and the Slinky. They're popular at one time but after the hype has died down, they're relegated to commodity status. Groupon is unsustainable because there are only so many businesses that can be suckered into selling their services or products at a demoralizing discount.
Think about it this way, on the week before Groupon, we had 80 customer appointments at full price and we were able to pay everyone, make rent, and keep the lights on.
On the week of our Groupon, we had 230 customer appointments at 1/4 of what we usually make and the week ended up being a loss. What's the rationale of working nearly 3x as hard for 1/4 of the money? The last time I checked, businesses have to make money to stay in business and Groupon's predatory practices are tough to swallow for any viable business.
Another disappointment was of the 230 customers that came in for their Groupon discount, only 10 of them have become repeat customers. In my opinion, Groupon is not worth the risk, the extra work, or the hassle because the reward is simply not worth it.
Roughly three-quarters of the Groupon patrons did not tip and they assumed that the Groupon deal covered the tip already. Wow. Only a quarter of the Groupon patrons were sensible enough to think of the gratuity.
It wasn't a fun experience and we'll never "Groupon" again.
This is a great post. I was curious about the benefit to businesses about doing a GroupOn campaign, so I built an ROI calculator on my blog (http://www.o2p.org/groupon-case-study) and there are a lot of fuzzy variables to determine if it makes sense or not. One of the concerns I heard from high end restaurateurs was related to brand damage, but everyone I knew that did a campaign seemed happy with it. I'm glad everyone shared their experiences here to help round out the story!
Cheers!
My wife owns a salon and she knows other salon owners since they're like a little clique of friendly competitors. One of her acquaintances whom I'll call "Elena" operates a higher-end spa and she tried a Groupon. Her experience was mildly negative because her regular clients who were booked for the week that they did the Groupon were unhappy with the crowd that showed up and made their normally relaxing experience less than satisfactory.
Elena was happy with the exposure but it came at the cost of making her regular clientele uncomfortable. The point of going to a spa is to relax.
I would surmise that it's a tradeoff where the business owner has to carefully look at the costs versus as the potential benefits and make a judgment call. In my opinion, Groupon is obviously great for the consumer because of the big discount but not so favorable for the small business owner who may not be prepared for the spike in what is primarily a highly discounted one-time sale.
I'd agree that Groupon is faddish but the business model is valuable thanks to the dedicated user base who'll jump on deals within seconds of receiving the daily email.
I thought Groupon was a great idea and but after further research it seems very bad. I learned a lot from the business owners here.
I just went to a chiropractor today and while in session he whispered to the secretary if I am a Groupon customer and she nodded yes. He gave me a pathetic 3 minute session. Instead of a regular 15-30 min one.
I would not have minded as much, but I drove an hour to get there (was in the area) and I was waited another hour in the waiting room. I left him a negative review on google maps before reading this. I bet he was mad at the Groupon devil deal he made and wanted to take it out on me. But I get the last laugh as I can easily dispute my card since GROUPON DOES NOT HONOR THEIR PROMISES. They say if you are unhappy they will refund you. Well from another bad experience it doesn't seem to work. Simply dispute it.
I give Groupon about a year more before they walk away with millions and a shattered businesses.
My brother pointed me the Groupon site and since I was curious, I took a deep and long view. I thought, "heck, why not try it once for my business…" But thanks to you I have opened my eyes twice big… sorry Groupon, I am never going to bite your bait.
I noticed the impact of discounts to attract clients, yet instead of posting to Groupon, I suggest you do your own math and do offer some promotions to your regular customers. i.e. bring a new client and both of you will get a special discount / gift / attention / deal / etc.
Surely growing your customer base will not spike fast and harsh as with groupon… but using your own promotions for your regular customers will be far more effective and everyone will be happy with the results. Guaranteed.
I am also a savvy customer myself, I do see the temptation for Groupon… it's like the daily devil in your inbox, resist the urge and tag it for trash.
[...] Groupon is a hot topic in the spa industry these days. The jury is still out on whether this "loss leader" marketing vehicle will actually create new customers that will spend more and return. The conversation lately, however, has definitely been skewing towards the negative, “The Dark Side of Groupon Emerges" to the overtly hostile “Don't sell your soul to the discount devil Or, why Groupon sucks.” [...]
[...] Groupon is a hot topic in the spa industry these days. The jury is still out on whether this “loss leader” marketing vehicle will actually create new customers that will spend more and return. The conversation lately, however, has definitely been skewing towards the negative, “The Dark Side of Groupon Emerges” to the overtly hostile “Don’t sell your soul to the discount devil Or, why Groupon sucks.” [...]
I'm about to launch a Groupon at my restaurant, only after careful consideration of the following groupon facts:
So we tailored our offer to not lose money on our discount. We actually cover our COGS. The offer is only a starter, customers will either spend 10 minutes with us, consume the offer, and leave, OR they will order something else from our menu at regular price.
As soon as the economy improves, Groupon and other discount buying sites will be out of business.
I got to say, all the negatives I read are so true. #1 If you're a business and want to give things away free and expect nothing in return do a Groupon.
Why?
If everyone gives a discount then the industry price level will drop, the service level will drop because of less money to pay for quality employees and basically everything will become like a fast food restaurant. The service industry is already in a terrible state in America and the trend has been to lay off quality staff for cheaper less experienced people so that industries can be more competitive and give more discount but actually they are just cheapening themselves and teaching the new generation that discounts are better than quality and good service. Good service with a true smile is always appreciated by good clients. Intelligent clients know when the smile is fake and right now a lot of the service industry "smiles" are fake. Lets hope the economy improves and people start getting educated about VALUE!
Well, I must say, "They got me." I am scheduled to have a discount offered at the end of March, beginning of April. After reading this posting, I am surely going to call to cancel that "discount." I had been contemplating canceling for a couple of weeks now, but this just confirms my thoughts. You only get about 25% of what your service is worth and ultimately, it's not worth it!
Thanks, Jen!
I am very happy I found this site as I was contemplating using Groupon. I want to thank those of you who encourage reviewing the business model and investment strategies before entering into a deal with companies like Groupon. They are here to stay, I think, because they offer a valuable service to consumers looking for great deals and businesses seeking a loss leader opportunity and business cash flow. I may still try the service, but need to construct a mini-business model that can afford to take on a loss leader opportunity that doesn't lose money, time or brand affinity – a conundrum at best.
I was inspired by your post to write this: The Parable of the Cobbler, a Groupon Tale
Guys, I have to tell you. Groupon and other sites are the coupons of the 21st century. I am positive that a similar response to yours was experienced when coupons first emerged more than 50 years ago. Its here to stay, you just need to think carefully on your goals with such a deal and communicate your expectations. Promote a new service or slower days is all. But we warned, this discount model isn't going anywhere.
Karen — Well said and you are absolutely right. There will always be companies waiting in the wings to take advantage of desperate, inexperienced, or unimaginative business owners.
It is really a simple decision. If you are already advertising then Groupon type sites are a great deal because there is not the wastage associated with traditional advertising. With Groupon sites you only pay for customers, whereas with other advertising you pay up front and may not get any customers at all. Calculate the cost of your advertising campaigns, the customers they bring in, and whether the cost of the campaign is made back. Usually the advertising campaign will create a loss. Of course you are building a new customer base and should make the cost up in future business. Groupon advertising is much more efficient.
If you are not currently advertising then any marketing campaign will seem expensive, Groupon included.
Group buying is not going anywhere as people always love a deal regardless of the economy. What a business has to look at when considering a relationship with a group buying site is will the discounted price leave room for a profit. Additionally, smart business owners who utilize group buying sites have a customer loyalty program in place, such as PlumReward.
For example, a group buying site customer comes to your place of business. A simple question "Would you like to join our customer loyalty program?" "Our customer loyalty program rewards you with 20% off on your next visit and on your 5th visit you get 50% off any service of your choosing." It amazes me that many businesses do not have a customer loyalty program in place.
Additionally, there are many group buying sites in the industry and many who do not charge 50%. There are group buying sites that charge anywhere from 30-40%. When a business compares group buying to traditional forms of advertising, the group buying marketing solution is far superior.
George hit the nail on the head. If you don't spend money on advertising any marketing campaign will seem expensive.
Groupon ends up abusing many of the businesses it works with and most consumers are completely unaware, so we're trying to get some of Groupon's problems to become a topic of discussion and hopefully lead to more fair transactions with Groupon as well as other daily deal sites. They won't change their practices unless it affects their pockets. "Like" the Facebook page for wiser business owners and consumers.
I've been reading lots of articles on this topic today because I was just interviewed for a piece on Smartmoney.com. I don't think it's fair to categorize Groupon as "the devil" to whom you're selling your businesses soul. It *can* be a very effective way to make money and share your business with the world providing you specify terms for your coupons that actually work for your business. Granted, the only negative Yelp reviews my company now has were from coupon folks who had "bad" experiences, and granted my Yelp rating will suffer for the three 1 star rating against 17 5 stars.
That said, I made a lot of money and cultivated several long term clients that have really been the bread and butter of my small business for the past year since I did my deals. I also had a very low redemption rate on my coupons — where they told me they expected 80% to redeem, the reality was more like 30-40%. For a site like Groupon which can do really large volume, this can very much be worth it. I worked with other smaller sites and it was more of a pain than it was a value because they amount of time I needed to leave the coupons out there for redemption wasn't worth it in the end. Overall though, having run two successful deals with groupon (one selling 480 coupons and the other 215), and also running deals with social buy, home run, zozi, savvy avenue, joffer, and a few others, only the groupon deal was really worth it to me in dollars and cents. I did land some cool press through the savvy avenue deal (never a bad thing in my book) and ultimately, since I run the world's first business of my kind, perhaps it is different than more established industries.
I don't think there's a simple equation for balancing out if it is a good fit or not for your company and just because other people have had less than stellar experiences doesn't mean that everyone does. In the end, if you make a deal with Groupon, it's not really fair to say "they abuse" business because no one forced you to make the deal in the first place. Groupon is taking advantage of an opportunity in the market — some people have gotten burned riding their train and some people, like me, have made money and had, overall, a far more positive than negative experience.
I disagree with a lot of what I'm reading here. You are not seeing the positives of Groupon-style deals. I am also a Groupon customer and I love their deals. I see that whomever has come saying that they love Groupons has been shot down, citing that they are the exception, but that's not true. Everyone I know loves to use Groupons. My wife is a young professional, earning in the $300k range. We are always looking for good spas and restaurants. To us, Groupons represent an opportunity to try a new business at a fraction of the cost, meaning we have very little risk. And you know what, we've had good and bad experiences. When the experience is bad, it's not that big a deal because we didn't pay a lot for it. When the experience is good, then the Groupon did a great job for everyone. We got good service or product for a fraction of the cost. Groupon made its money. The business made enough to break even, most likely, or maybe have a minor loss, while showing a good and valuable future customer that they are a business worth returning to. The onus is on you as a business to A) structure a deal with the groupon so that you don't overextend yourself and end up providing terrible service counterproductively, and B) do the best you can to create a memorable experience for your customer so that he/she can't wait to come back. I've noticed that the companies that complain the most about Groupons are companies that simply do not provide good enough service to retain the customer. How much do you spend every month on advertising? And out of that billboard or ad in the paper, how many customers came to you? However many it was, to get the maximum return for your marketing investment, you better do a great job otherwise, they are not going to come back. So use Groupons wisely and let it work to your advantage. In the long run, if you are providing excellent service or products, your customers will return. I am now a regular at a couple of restaurants that I have fallen in love with that I may have never gone to before.
Groupon SUCKS. First, they bother you SO MUCH to get your business to offer it, so I gave in. After a year of harassing me, I said, "Ok, how bad can it be???" BAD. They allow people to get refunds and they don't tell you when that happens, so then you have 4-5 people who booked together and then they all don't show up and you're screwed because your employees are sitting around on a busy day with NO ONE. THEY ARE TERRIBLE!!! Small businesses DON'T DO IT!
I learned at an Esthetics Conference many moons ago that you should NEVER discount! For one reason… once you discount, the client always wants to pay that price, and once you stop offering that price, they will go somewhere else.. Instead; it is better to give away something for free with another service… I generally give away a free facial with an 1.5 hour massage… the interesting thing is that about 40% of my clients will rebook a facial at the regular price at least every other month on top of their regular massage.. Doing it this way introduces people to a new service… I also do something the client realizes is valuable.. (a facial seems like a great service to offer once for free vs. say a hand treatment, which would be very lame). I own my own private massage & skin care studio. So, I work for myself and have more options.. Sometimes I ask the client what he or she would prefer as a freebie.. a facial, body polish etc… i make my own body polish so it costs me literally 65 cents per treatment.. i order sea salt online, and use my own essential oils.. and the facial is just a basic hydrating, sensitive, oily skin facial..
Groupon is the worst business decision I have ever made. Ok I added insult to injury by doing a Brazilian wax Groupon.
I was fully aware that there would be no profit from the actual sale of the certificates. I had to discount a regular priced service 50% then groupon takes half of that. Oh yes and Groupon makes me pay for the credit card processing too. Oh yes, They also lowered the price and increased the discount to about 67% when they ran the offer without my permission. So after credit card processing fees we get about 16.5% of what we would get at regular price?
I still had faith and tried to make this Groupon experience work.I sucked it up. I understood that with paying my staff and for product I would be in the red on each service but it would be worth it if the clients came back. If the clients purchased additional services or even tipped the staff like regular paying customers do, it would be ok. We would make the very best out of this because if we get them in the door, we will make them see what great services we offer and they will return! We were going to work extra hard to make this be a good experience.
This did not happen. The majority of the Groupon clients are regular clients of GROUPON and go where the next GROUPON deal is. Tipping is rare and they don’t care if you get upset as they have no intention of returning anyways. Some even stated that they NEVER pay full price for spa services. They have become professional Groupon buyers. What Groupon was and what it is now may not have changed but it has changed people. There is this huge Groupon, Livingsocial ect mass of consumers who regularly purchase these deals for food, entertainment and beauty services. This is how they live, save money and get what they want. The problem is that businesses like mine are seeking return clients and profit. We want you to experience our great service and products so you will want to return. These professional spa hoppers are not looking to become loyal customers. They are loyal customers of Groupon deals.
So now that our Groupon deal has calmed and we can’t wait for those certificates to expire, I see how badly this deal harmed my business. No one wants a Groupon client on their books. Groupon clients are avoided by staff. The Groupon client is not treated as well as a regular client. Even if we offer our own 50% off discount, the clients we get from ANY other source,prove better returns. Staff now views Groupon people as a waste of time. We also had to refuse service to some Groupon clients for hygienic reasons. This has NEVER happened in my spa before!
I had really hoped it would be a good deal.
Groupon is a very bad thing for medical spas.
I have a love/hate with Groupon, LivingSocial, etc.
I'm a massage therapist, and never, ever thought I'd find myself working so cheap. Part of me feels that while it may not pay well, at least it's paying, and exposing my work to people that, even a small percentage of, might just be back, buy a gift certificate next Christmas, tell a friend about the place, etc. etc. If a small percentage come back, refer a friend, buy a gift certificate, maybe, just maybe it might be worth it?
But I want to cry when I see a client that tells me they get a massage every month, and when I ask who their regular therapist is, and they tell me "whomever is running a Groupon…" it makes it very hard to give 100%.
Then there are the Groupon clients, who are so incredibly cheap that they don't even tip… not realizing that the time I've taken to prepare, provide and clean up, when averages out, comes out to less than minimum wage after Groupon takes their share, and my employer takes her tiny share.
I have been told that Groupon/LivingSocial, etc. are having a harder time finding merchants, and I really hope the general service population is wising up, and stepping away. It's not worth it, and I feel by offering my services so cheaply I'm "throwing pearls before swine," and I'm done with it.