Intelligent Discounting
September 9th, 2010 • Posted by Janell Loving • Permalink
Recently, I found myself engaged in an email discussion with a friend on why I hate Groupon, and ultimately, it came down to this:
As a consumer I appreciate a great deal, but Groupon and sites like them create an economy that drives down the local service market value (without providing any option for recovery) already struggling to compete with big corporations that have a lot more money with which to compete. I would never have given this a second thought if I had not personally witnessed the strain it puts on the small independent spa and restaurant businesses.
Undoubtedly, in the last several years, you have read or heard our opinions on the dangers of discounting for small businesses, and more specifically what we think of Groupon and their outrageous 50% commission with only 22% repeat business.
So, if you want to use discounting to drive more business to your spa in this tough economy, what's the right way to do it? Consider the following strategic guidelines to find the most efficient discounting practice for your business:
- Create a discount program that will deliver a brand value for potential clients, and a high ROI for the spa/salon.
- Avoid directly competing with your existing service offers.
- Build an offer with a higher margin from which to discount by adding product, or non-staff required services.
- Engage your entire staff in the promotion.
- Front desk staff should offer details and engage existing clients to participate in spreading the word.
- Encourage therapists and estheticians to work within the promotion cost to facilitate awareness and gain new business to benefit the entire organization.
- Promote a group deal that encourages viral growth.
- Use existing clients to go viral and bring in like-minded individuals.
- Extend your community relationship reach.
- Run the deal yourself, or use niche, local deal sites. Don't give 50% of your revenue away.
- Focus on return client visits.
- The goal is to build your client base and create a relationship, not devalue your brand by catering to deal seekers or nomad buyers.
- Create a deal that rewards subsequent appointments booked.
- Know where your control panel is when working through your discount promotions.
- Be aware of your spa/salon's resource limits.
- Customer Service must be fully engaged to make the most of this marketing effort.
The goal of intelligent discounting is to create engagement, build relationships and provide a branded, value-driven niche for your spa/salon. When used wisely, it can be an effective tool to deliver exposure and create new, lasting relationships without devaluing your current client base or local brand.
• Trackback • Posted in Creating Customers, Spa Business Management, Spa Marketing
Yes, yes and YES!!! Why cater to strangers via email with a 22% return rate? Spread reasonable rewards and discounts to the clientele we truly WANT.
"Use existing clients to go viral and bring in like-minded individuals" = genius.
Love this post.
Thanks,
Allissa
Interesting post, but I beg to differ. It's always going to cost you something to acquire a new client and this seems like a great way to do it.
To build my multi-therapist clinics, we would give away thousands of discounted and even free gift certificates. The only thing that has been more effective has been direct referrals.
Far from the 22% quoted, my rebooking rate was around 60% and I know others, even Groupon customers, have had that same experience. Here are some audio clips from people that use discounted certificates and have built up their client base quickly: http://bodyworkbiz.com/60days-audio.php. As you can hear, it's had a dramatic effect on their bottom line. I have dozens and dozens of reports from people like this to demonstrate that the strategy works.
Of course, if you are implementing this strategy, you have to do it in a way that maximizes your revenue, but I think it's wrong to dismiss the opportunity you have to connect with large numbers of potential customers with Groupon and other similar sites.
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[...] as we show you how to strategize and plan to Roll Your Own Groupon and discuss the four steps to intelligent discounting. Learn how to increase profits, bring in new business and maintain your local brand [...]
This article and comments fail to report that along with a 50% commision on Groupon Coupons, there is also a 5 year manditory commitment by your business to those coupon sales anywhere in the United States by law. In fact there is a class action lawsuit pending against Groupon regarding this matter. Heres another fact…if you no longer accept the coupon for the discount, then you still owe the customer the cost of what they paid for the coupon. I got this information directly from the Groupon sales person with Due Diligence. Be sure to check these facts out yourself with the company sales department, and if the person tells you something different, they are not being truthful. Ask for management.