Groupon: Only 22% repeat business
August 25th, 2010 • Posted by Bill Bice • Permalink
Groupon's own research says that only 22% of Grouponites turn into a repeat customer. From the Wall Street Journal:
When Andrea Stern chose to work with a smaller group-buying website to put together a deal for her company, Satori Yoga, she got very little help deciding how much she should charge and what exactly she should offer. Now that she's just finished her third deal with a third website, she's learned how to structure the deals so she doesn't lose too much money. But she's still having trouble getting customers to come back to her San Francisco studio. "You can't blame them when every day someone else is trying to give them a better deal," Ms. Stern said of the bargain hunters.
Despite this, Groupon says they have a long line out the door:
The Chicago-based company says 35,000 businesses are currently waiting to be featured on its site, with 700 new U.S. businesses approaching it each day. "For every business we feature, we pass on seven," Groupon Chief Executive Andrew Mason said. The company, which generally keeps 50% of the coupon price, expects to do $400 million in revenue this year.
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I have seen first hand the negative backlash that these “bargain" sales systems bring to a spa. Clients shop to see which spa is doing the type of sale next, then they shop at each spa going from spa to spa every month to catch the “sale wave” as it were. The repeat customer seldom happens for many in this system as told to me by other spa owners in my area who have tried these programs out. We as spa owners should be better respected for the services that we offer. The work that the trained therapist offers is being repositioned in the minds of the general public through such "bargain" offers, and as long as we choose to precipitate in such "bargains" we help to undermine the public perception as to who we are and what we offer by this system of de valuing. If you want to precipitate in these programs then be prepared to suffer the damages of doing so.
I wondered how anyone could stay in business doing these promotions, then I found out that a spa in our area is using unlicensed interns to provide the services. I guess with free labor, you could make it work; after all, you get what you pay for! If I'm going to provide deeply discounted services, I would rather give the discounts to my loyal customers who have supported us through all our good times and bad times over the past 10 years.
I admit I tried one of deal of the day type promotion and the "vouchers" expire next week… thank goodness! In my experience:
The majority of these users of these programs are going from one deal to another and are not interested in becoming a repeat customer.
I employ highly-trained, experienced, licensed therapist who were paid based on the full price I am confident that the lack of repeat business was not because of poor performance.
The cost was high for little return. I recommend putting your advertising dollars to better use.
I did a groupon and I admit it was a nightmare these people never read the fine print and expect that you don't either. We sold over 1700 and got complaints that we were not answering out phones HEllO! Then people went to the groupon people and told them that we wouldn't book them. Now, how can you service over 1700 people and your own clients and get everyone in on the weekend of the deal or at 6:00 I mean the groupon people even had someone call us and ask was that true. Please groupon school your people on what it is really like for the business owner when you sell them the deals. Tell them what to expect (maybe they won't buy) instead let us take the heat. Because my experience is that these people will lie on you or whatever to get what they want. I had to learn a huge costly lesson. Which my staff, all licensed, had to pay for I would never do it again. Be careful!
I just gave a massage to a hair stylist whose high-end salon she works at did a Groupon one month before Christmas and according to her it was a major mess. Groupon failed to inform them of the pitfalls, did not tell them they could put a limit on the sales. They sold 500 Groupons and Xmas is a super busy time anyway for this salon, which has 20 stylists, 1 esthetician, 1 massage therapist & 2 nail techs. Their regular clients had pretty much already taken most of the available appointments for December so when the Groupies started calling and discovered they could not get a booking till January they started complaining all over the map. Groupon also told them they could not get their share of the money UNTIL they honored ALL Groupon certificates. That was 10 months ago and my stylist friend said she was forced to take Groupon clients and was promised she'd get at least $8 per person, but has yet to see a dime. Google "Groupon analysis" to read more case studies of how Groupon is like heroin for businesses… easy to get hooked, but leaves you sick and dependent in the long run.
[...] to make up the loss generated by your Groupon. However, Groupon’s own PR predicts that just 22% of Groupon users will become customers. That translates to just 132 new clients for a dismal $6,204 in net profit from your new Groupon [...]
[...] of discount marketing customers is not 100%. According to discount marketing company Groupon, just 22% of Groupon users will become customers. For a deal that sells 500 units, that only translates into a best-case scenario of 132 new [...]
The Groupon craze negatively affects all salon and spa owners, despite whether you decide to sign on to their ridiculously discounted program or not! For example, last summer, we started to offer a new nail service that has been hugely popular with our clients and has brought in numerous new clients to our nail room. We were one of the only salons/spas in the area offering this service due to a nation-wide shortage of product. (We bought ample supplies before the shortage occurred.) During the first month that we offered this service, we advertised a 20% discount as an introductory offer (a reasonable discount.) Despite the "exclusivity" of the service in our area, we still kept the price reasonable, compared to salons and spas offering the service in a major city, 50 miles away! Unfortunately, several "city" salons offered this service in Groupon promotions. We now have clients ask us to discount this service because: 1. They can buy Groupons and travel into the city to have the service done at a significant discount, and 2. We must be charging way too much for this service because other salons in the city can "afford" to offer this service at 50% off to thousands of customers! Herein lies the danger for all of us. So many salons and spas are offering Groupons for 50% off (or more) that our clients now have the perception that all of us "MUST" be charging too much for our goods and services. Groupon is changing the pricing landscape for all of us! The business owner might think of using a Groupon promotion as an advertising expense, realizing that he/she is going to lose money in exchange for bodies in the door, but the consumer only sees the discount and they assume that the business is still making money at 50% off! (Surely a business owner wouldn't agree to discounting their product at a 50% discount if they weren't going to make a little profit…have you heard that one from your clients?) As salon and spa owners, we know that offering our services at 50% off is not sustainable (unless you have access to cheap, unlicensed, undocumented labor.) Salon and Spa owners should wake up and realize the damage that is occurring with this group-buying craze. If you are going to do a group-buying promotion, pick a company that gives YOU,the business owner, more control over the deal! Choose a discount that is reasonable (and more in line with our industry) and set a reasonable cap on the deal. Don't pay the credit card transactions! Don't be strong-armed into using a group-buying company that dictates the rules and takes all the profit, at your expense. Don't succumb to the discount devil!
[...] worth a lot less than those who liked the page organically. As business who use Groupon are quickly finding out, people who come in for a cheap deal rarely return when that deal goes away. It's also worth [...]
[...] this is good? The reason: repeat customers. However, what little data can be gathered suggests that most people don't convert to long-term customers. Most deal-site shoppers are looking for a "quick fix" for cheap, visit once, and are [...]
[...] aren't doing a great job of retaining this new business. From SpaBoom.com, it says that Groupon's repeat business is at 22%. True, a lot falls on the shoulders of how you take care of those clients and the value they see in [...]
We did Groupon only to be disgusted by the outcome. We ran the numbers before deciding to issue a Groupon and we calculated that even if there was a 0% conversion, we would at worst-case, break even. Not only have we ended up in severe debt from the Groupon deal, but Groupon didn't even pay us our third check, leaving us to cancel the remainder of Groupon voucher holders thus completely hurting our online reputation.
Our story was featured on MSNBC's show "Your Business" on the Sep 18, 2011.
We have detailed the troubles in our blog: http://www.thelasergenie.com/blog/?p=169
I suggest all retailers stay away from Groupon and all other daily deal clones.
The majority of these users of these programs are going from one deal to another and are not interested in becoming a repeat customer. Thanks for your info.