Happy Mother’s Day!!
I wrote this article about Groupon in InSPAration Moments and had so many comments on it. Read it and leave your comments!
While speaking at a tradeshow recently, the Groupon topic came up and I expressed my opinion.
I explained to the audience why we don’t do it and many of the attendees said “AMEN”.It seemed that many in the class had tried it and are feeling the pain.But is it bad for everyone?And if it is good, who is it good for?
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Why is Groupon one of the fastest growing companies? They are getting richer and richer every day from business owners and their hard work.I am not a fan of this marketing strategy. Why? Because it is sooooooo expensive!!! There are many other economical marketing strategies to drive business into your spa without breaking the bank.
Let’s start by briefly describing what Groupon is in case you are not familiar with it.
Groupon is a web site offering consumers big discounted DEALS on a wide variety of products and services.
They send a daily e-mail notifying subscribers of local bargains that are likely to resonate with shoppers, like a $120 massage for $45. Businesses pay Groupon nothing up front. But Groupon typically takes 50% of what consumers pay for the Groupon. That means the XYZ spa is providing a treatment that usually costs $120 and only collects $22.50. Groupon gets the other $22.50 regardless of whether the consumer uses the Groupon or not. By the time you pay your therapist, your product cost, your credit card fees and other expenses, etc. you are in the hole!
Most spas do this because:
1.They think they are going to bring new people into their spa.
2.They think they can retain more people even though the price is actually below cost!
I feel it is my duty to open your eyes to some things you may have not considered. I am being MOM. You need to take a step back and understanding the effects Groupon has on your business.
Getting Real
Who is benefiting from Groupon?
·Groupon, they make 50% no matter what.
·Consumers who are bargain hunters receive big savings.
Fact: Clients who use Groupon are bargain hunters. Yes, you may get some new clients but these people are of a certain mindset. They are looking for deals. They look for things that are substantially price reduced and wait for them to be offered at a sizable discount.
They are deal hoppers. The only thing they care about is the discount they receive. It is not your brand, your experience or your products. It’s all about the size of the discount. They are the least loyal people when it comes to retention. Is this the type of client you desire? I don’t think so.
Groupon Effects: Trains your clients to wait for the next deal.
Groupon essentially trains consumers to wait for the perfect sale. This will hurt you in the long run, as each Groupon you issue potentially lowers your profit. When GAP (clothing) issued a national Groupon, they lost $7.5 Million!!! You need to factor in all of the costs associated with having a Groupon deal.
Factoring in your Spa Costs:
How much is your labor cost?
How much is your treatment cost?
What are your operating costs?
This will help you to determine the price point to at least “breakeven” or make some profit.
If you are going to try Groupon anyway, then please keep the following in mind:
1. Be prepared for the traffic. Make sure you have enough people to handle the traffic flow. Have a system ready to take reservations and teach your team to at least upgrade the treatment.
2. Set a short expiration date, as you don’t get paid until the Groupon offer is over. This can affect your cash flow.
3. Limit the number of Spa Groupons to be sold.This is a very wise practice.
4. Deliver a great experience. WOW these bargain hunters with something that isn’t normally done at every other spa. Be unique. Maybe offer them a very inexpensive membership since they like low priced items.
5. Promote your loyalty program to increase your retention. If you don’t have one, call us.
6. Capture their e-mail address. Make it extremely easy for them to do this. Another is to offer an incentive to give up their e-mail address.
6. Reserve their next appointment before they leave.Follow up with them.
7. If you don’t do any of the above 6 steps, you will find yourself in a big hole.
All we can say about this is good luck… And you should have listened to Mom!
Do you have a Groupon story you would like to share? Please leave your comments! [/fusion_builder_column][/fusion_builder_row][/fusion_builder_container]
