Groupon, Buywithme, The local Deal, etc....

[RelaxandRejuvenate]

A Possible Chink in the Deal Site's Discount Armor

As you probably know, Groupon and most of it's competitors sell a voucher for a specific service or package of services to be redeemed at any time during the valid redemption period -- usually 60 - 90 days. They command a 50% discount on their offers and take half of what is left, leaving the merchant with just 25% of their list price revenue.

Compare this business model with the original discount websites -- Hotwire, Hotels.com etc.

#1 major difference -- the travel industry is selling perishable things. once that plane leaves, you can't sell the seat. Once the date on the calender changes, the unsold hotel room is lost forever.

If they see inventory unlikely to sell, they put it on sale via one of these discount sites. In the industry, this is known as yield management. Try to maximize your revenue each and every day based on demand, by modifying your pricing.

Spa services / massage appointments are the same. once the hour passes, it is a missed revenue opportunity. The one difference is Spas don't raise their prices at peak times, whereas hotels and airlines really don't have a list price, which is why the same hotel room can be $500 one day and $200 the next.

Clients are willing to endure all sorts of restrictions to get the best deal -- Hotwire can make you change planes twice to get to LA, hotels give you a room of unknown bedding or location, airlines make you purchase the ticket 2 weeks in advance, stay over a Saturday night and pay through the nose if you want to change your plans.

So why are spa services being sold via voucher instead of a yield management system?

For nearly a year, we have been working with a yield management system for spa services for our NYC spas. Each morning we can post open, and unlikely to be sold, appointments for specific services at specific times at whatever discount we think will help sell the slot -- usually 40 -50%, much like the deal site voucher discounts.

But WE are in control of when they are redeemed, since we are selling the slots WE need to fill, not a voucher for a client to use when it is convenient for them. No trying to figure out of they are on a deal site voucher to steer them when we need them to come in -- we sell a slot and the client buys that time and service. We control the outcome 100% of the way.

Like other yield management systems, their are significant restrictions on the offer -- the service is not changeable nor is the time. And if they client does not show up -- tough -- it is a non-refundable purchase.

Unlike Groupon Now, which has offers valid for an entire day, yield management allows you to focus on the slots you need sold, plus it does not take 50% of remaining revenue

And as an added bonus, the yield management system only takes 15% of the merchant's remaining revenue -- and that includes the Credit Card processing fee!!

Last weekend, our yield management partner did a trial offer with GiltCity, one of the largest deal site subscriber bases in NYC and certainly amongst the most high end. GiltCity had always sold vouchers -- like everyone else in their space -- and could not get their head around yield management offerings and was unsure if their clients would be willing to buy a specific service at a specific time instead of the open ended voucher.



Though the trial was not 100% in the traditional business model -- usually we can take down an offer if a full-price customer books the slot and instead of posting the day before, we posted inventory for Friday Saturday & Sunday that was released on Friday morning (they were not using the yield management software engine, but a manual proces to bridge the too), the results were astounding.



95% of our offers sold within two hours of being posted, and the average discount was 45%. The only things not selling were a couple of service at the earliest possible time -- jsut 3 hours after the offers were released -- 1pm on Friday massages are hard to sell to locals.



The 6 other spas participating in the trial had similar results.



Which begs the question --- if clients are willing to purchase yield managed/restricted appointments at a 40-50% discount, why would merchants offer a 40-50% discount on an open ended voucher? This test proves quite conclusively that the deal seeking public is willing to accept fairly stringent restrictions on this level of discount.



Think back to the airlines -- more restrictioins, bigger discount. Fewer restrictions, higher prices.



It will be interesting to see how GiltCity proceeds with a yield management business model, but I think they might be a little scared of what it means to their core business model. And all deal sites should be.



I think as word gets out to merchants that yield management works measurably more favorably for merchants than the voucher model, the tide of heavily discounted vouchers will start to ebb in favor of the merchants. once a yield management platform builds a large enough customer base to deliver these kinds of results, the deal sites will have to rethink their approach or risk losing service industry clients in droves.



yield management helps the merchant control the outcomes -- vouchers should be a 25% discount at most -- not unlike buying a series or package used to be. Hopelfully that day is not too far away.

[JLWmassage]

http://news.yahoo.com/video/bostonwbz-1 ... 24283.html

[pueppi]

http://news.yahoo.com/video/bostonwbz-...-26924283.html

What exactly are we looking at here? I am getting something about "Blackberry's Big Problems".

Maybe you could give us a short synopsis of what you were wanting to present?

[JLWmassage]

http://news.yahoo.com/video/bostonwbz-...-26924283.html

What exactly are we looking at here? I am getting something about "Blackberry's Big Problems".

Maybe you could give us a short synopsis of what you were wanting to present?

http://news.yahoo.com/video/bostonwbz-1 ... 21354.html

Try this link

[JLWmassage]

I must be getting calls from these Daily Deals sites at least once a week now. And I just got a call from Living Social and I told them give me 60% and we will talk about running a deal. And my argument is I now massages always do well on these types of site as I have experience with another company.

The rep said no way on the 60% and I said no way that I will run a deal with them.

[pueppi]

For those of you who like Groupon deals, this is an excellent article written by Susan Epperly, LMT, who practices in Austin, Texas.

[JLWmassage]

For those of you who like Groupon deals, this is an excellent article written by Susan Epperly, LMT, who practices in Austin, Texas.

I was interviewed for her audio book

[bodydoc]

I am a chiropractor in the SF Bay area and am quite experienced with the Deal of the Day type marketing. I've run massage deals on Groupon, Living Social, Trubates, and BuyWithMe. It's been a mixed bag, to be honest.

Here is my advice to you all:

1. Don't be afraid to negotiate a lower commission to them. I've had success negotiating a 15% cut for some sites. Remember, everything is negotiable. Unless you have very low overhead, don't settle for anything bigger than a 40% cut to them. Tell them you understand that the purpose is to bring in a rush of business, but doing so is going to cut into your business' capacity to service regular-paying clients and you will experience a loss of income, which is unacceptable for your type of business. Tell them it's an economic reality, and if they don't give you a more favorable rate, just say no thanks. My prediction is that Groupon and other sites are going to be COMPELLED to take a smaller cut in the near future, even now, now that there are hundreds of competitor sites.

2. Have short client intake form. It should ask if they have pain or other medical conditions you need to be aware of. At the bottom, put in a short statement like this: "We welcome Groupon and other discount coupons, but please be aware that therapists are taking a significant pay cut in order to promote the business, so if you are satisfied with your massage, please tip based on the normal massage rate of $80 (or whatever yours is)"

3. Use Genbook to automate your appointment scheduling, and mention in your Groupon Deal that clients are encouraged to use Genbook to make appointments. Genbook handled 300 massage appointments for me, better than two full time receptionists. Why waste your time, or your paid staff's time, scheduling these steeply discounted appointments? Don't do it. Most everyone is comfortable transacting business online these days. I have a blog that explains it: http://www.chiropracticrescueplan.com/s ... -business/

4. Lastly, capture everyone's email address (ask for it in the Intake form in #2 above) and market to them every month. I use GetResponse. Make a Facebook page and aks them to Like It, and incentivize it.

5. One last thing, set aside times on your schedule for your regular paying clients. You can limit Groupon purchasers to certain days or times of the week; Groupon allows this in your Deal write up.

[schedulista]

Just wanted to second bodydoc's point about collecting emails. If you're thinking about a daily deal, it's worthwhile to set up online booking beforehand (if you don't have it already). Every customer who books online's email is captured automatically, so you can market to them later for free using tools like mailchimp (http://www.mailchimp.com).

As others have discussed here, Daily Deal sites can bring in a lot of business, but you don't want them to be one time customers. The intake form with email address is also a great idea to catch the ones who slip through the cracks.

Full disclosure, my company does online scheduling. That's how I know when folks do a daily deals and link to their booking page from the offer, most of the appointments are booked online.

[squash_blsm]

One of the most popular service on the deal sites is massage.
It is also my best seller.
Why would I EVER discount that service - our rates are already the best value in the entire county.

We negotiated services that were high end, high profit, undersold, and that showcased why we are special.
My partner KNOWS that I had bad experience with these sites as an employee in the past so it was a tough sell...but I DID eventually sign up with a "deal"

R & R's tactic is the better move.
CONTROL what you sell, what the discount is, the scheduling AND keep more of the profit!

We have a marketing campaign ready to go...
our deal is for NEW clients. We will offer the same deal to current clients - they purchase directly from us - that's 100% more profit.
We have a welcome packet with several "deal" coupons, with short time frames ranging from 15% to about 50% discount (another high end package that I already offered current clients).
PLUS we have a follow-up plan in place to try and control/circumvent any negative reviews - which are bound to happen with some of these people.

I was the LAST person in the world that would have signed up with one of these companies...that is until I put some thought into it...and although our deal has yet to run, I am confident that I put my best effort into making it work. Our primary goals (besides showcasing our talent) are exposure and name recognition, increased web traffic, a few new clients, additional collected emails for future marketing, and (hopefully) some positive activity on review sites.
Oh - and a nice little influx of cash for a piece of new equipment that I have my eye on.

I think that going with one of these companies can be a pretty big risk.
If I had a bigger database and been in business longer, and in an area that was covered by a yield management company perhaps I would be able to go the same route as R&R - which is clearly preferable...less risk, better profit.

[athletica]

Excellent advice from others. In my opinion 90% of people that do the bargain finds bounce from deal to deal. Only 10% will result in return clientele.

1) Negotiate the best percentage possible. There are so many deal sites, companies are bound to do lower percentages.
2) Place a cap on how many offers. As well as expiry date. I would suggest a 3 month expiry. Any longer and your therapists will start to lose motivation. The promotion will work great for new therapists, anyone with a steady clientele will not enjoy working for half price.
3) Capture email addresses.
4) Get people to rebook!
5) Do your deal find during slower periods, just remember you'll have 30-40% book in the first couple weeks of your offer, and 30-40% book in the final weeks of your offer.
6) Do a 30min massage offer - people will pay the difference.

[squash_blsm]

athletica - yes, you mention one of the MOST important aspects (besides the rebooking!) to making the most of the client visit.
That is the UPSELL.
If you can upsell to a longer or "better" service, or sell retail you are in great shape.

[JLWmassage]

Having done this type of marketing a few times now. I have learned that these clients are more likely to write a review and I have used that to my advantage! And I also won't deal with a daily deal company unless they give me at least 65% of the sales.

These sales reps can be vultures and my rate cuts them off right at the knees and they loose my number rather quick.

[schedulista]

JLW, did you ask the daily deal clients to leave you reviews, or did that just happen on it's own because those types of people tend to leave reviews?

[JLWmassage]

JLW, did you ask the daily deal clients to leave you reviews, or did that just happen on it's own because those types of people tend to leave reviews?

I use genbook. And genbook sends clients a form 24 hours after their massage asking them to leave a review. And those reviews get posted on my genbook calander.

[athletica]

I really like what this business did with their testimonials page. I'm pretty sure I will borrow the idea for my own site \

http://bostonbodyworker.com/patient-testimonials/

[PremoMT]

hi all,

I'm anxious and nervous about my deal that will be running next month...
I am running the deal to bring in new clients, drive traffic to my site, and get my name more visiable in the community.
I've been in business for 4 years now, and need a little boost...

I did a bit of research, asked a lot of therapists I know in the area about how their deals were, what worked, what didn't if they'd run it again etc. so I had a good basis to start from when contacting groupon with what I wanted.

Im running a promo for 3 different services (all priced the same and same duration buyer chooses one) for the period of 6 months, with a cap of 500.
I am a one woman show, so I do have an online calendar for them to book through, and all appointments are set to tenative until I confirm- which I plan on calling each client to speak directly to them, and attempt to upsell to a longer service prior to their coming in.
I gather emails and birthdays on my intake form, so I intend to continue doing this for future mail campaigns.

I've tried hard to stick to my guns about not discounting my services... But there has come a time for it.
Im nervous!
Please send positive energy my way!

[athletica]

How long does it take to execute each service that will be offered? Is there a strong possibility that you will reach the 500 cap?

The reason I ask is you might find your self insanely busy the first and last month of your deal.

Looking back at when my clinic did a groupon offer we sold 323 offers. Were a team of 4 massage therapists. It was difficult to service all request in the first and last months of the offer.

[squash_blsm]

500?!?!?!

That is a ridiculous amount for ONE person!
Since you haven't run it yet see if you can reduce it down to 300 or better yet 200.
Do the numbers - if you work 20 days per month and you sell 500 your schedule will be FULL of discounted sessions with NO room for regularly priced sessions. PLUS the discount customers will get pissed REAL fast when you are unable to book an appt when they want it.
And you will totally burn out if you are working for no money.
I am fearful that you are setting yourself up for a disaster.

Jeez - I am only looking to sell 50-80 of my expensive deal...and I will be extremely happy with that. (I am the sole provider for this particular special).

If you are looking at it from the standpoint of getting your name out there, the ad itself will do that even when people don't buy the deal.

My friend ran a groupon last year and her web traffic was WAY up. She got many calls and bookings from people who did not even buy the Groupon.

[RelaxandRejuvenate]

Could not have said it better...

You don’t do drugs, so why do flash sales? (well, maybe not everyone here...)

http://www.hotelsmag.com/MembersOnly/bl ... opicID=1...

[PremoMT]

Ran the deal, and came no where near the cap. The deal I sold was for 45 min sessions, which has given me the opportunity to upsell to each client prior to or during the session which I have done. So far I have been able to accomidate each caller with the exception of one who "wanted it now" on the day the deal ran.
I prepared my regular clients by telling them that although they were priority #1 when it came to my avaliable time, if they did not book in advance, they may have to chose a different time than they would have liked.
As far as working for no money- I have prepared myself to be a little more sales oriented than I have in the past. I understand that although these clients may rebook initally and end up backing out, I am "selling" their next sessions with more enthusiasm than *I* have in the past. Which in turn will bring me more revenue than I have been making.
So as well as getting my name out there, traffic to the site, and more bodies through the door, it is a learning experience for me to need to "sell myself" with confidence.

so far, so good. Day one. I have faith and a positive attitude that, although I dislike it as much as ME, this is the best thing I can do for myself currently and that it will help me continue to grow my business.

[squash_blsm]

I think you will do fine.
You will get a better idea of all the ins and outs over time.

Some people will be awesome - some not so much.
You will want to focus on engaging those people who will realistically become clients.

Someone who lives an hour away probably won't be a regular.

Do you have a follow-up offer in place to encourage a second (and third) visit?

[PremoMT]

I am wracking my brain with that now. For one thing I would like to do a survey to find out about how they felt about my services, website, location etc. Also I would like to encourage reviews on google and yelp, as well as drive traffic to my Facebook page.
So I'm zooming around here trying to see what I can come up with to write up and send out to the new clients.

In which if they write a review, or like my page or yada yada yada... And I will offer an irresistible deal for them to come back.

[rmt4u]

I just came across this post abour these deals, not sure if this was posted yet.


The Reason Stellar is Closing

Posted on June 20, 2011


The surface story is that I closed Stellar to transition to a private massage practice.

Of course, being an incurable optimist, I always put a positive spin on things. But there’s not really a positive spin to the real reason we’re closing: selling vouchers on Groupon-like sites lost me a lot of money.

“A lot” means several thousand. That means I not only made zero dollars for the whole year Stellar was in business, I actually paid to work for a year. I’m sure some of you are cringing at that thought.

How could this happen? My practice in North Carolina was so successful I was able to sell it for a tidy sum. The new owner is now happily making a living doing his own thing. Did I suddenly become a bad business person, or bad at massage? (These were the first things I wondered about myself.)

What happened is that I bought into an overly-optimistic advertising idea. Groupon-like deal websites sold me on the idea that if I got enough customers in through the door, I’d be able to convert a good chunk of them to regulars. Then I’d have a thriving business.

This seemed reasonable. My return rate (percentage of clients who became regular customers) was around 75% at my practice in North Carolina. I estimated that even if only 25% of voucher redeemers became regulars, I could make it work.

When I was approached by these deal sites, there were virtually no statistics like this. I searched around online for business’s experience with running deals; there was very little info. So I took the risk. I knew I could lose several thousand dollars. And based on my previous experience, I knew I delivered outstanding work that most people wanted to come back for.

Months after running my first deal, I began compiling some sobering statistics.

It turns out only 7-8% of voucher redeemers return to become regular customers. I knew people weren’t coming back, but I didn’t know it was that bad until I did the numbers. Still having faith that people would return if I fixed whatever I was doing wrong, I spent a lot of time trying to improve my offerings, my customer service, my marketing and sales. I even moved to a new massage studio thinking the better location would be enticing.

Eventually, I noticed that one of my voucher deals had a return rate that was TWICE as high as the other two. This was the TravelZoo deal. Now, 10% return rate isn’t good, but why would there be a clear cut difference? The other two each had around 5% return rate.

The difference is in the demographics. TravelZoo is a travel site that runs deals, not a deal site primarily. Their list (as I was told by the TravelZoo rep) is older, more stable, and more affluent than that of Groupon and related sites.

Bingo. The deal sites pulled customers from the wrong demographic.

My voucher customers wanted really nice, high-quality stuff for half price. Nothing wrong with getting a good deal. But since there are so many places to get a half-priced massage, there’s no reason to be loyal to me.

Naturally, I can’t run a business on half-price massages. I’m firmly in the Quality camp. I’m not in the race-to-the-bottom competition on prices, because I’d have to make very major compromises on quality.

I also can’t run a business if voucher redeemers don’t come back. My biggest mistake was in being overly optimistic about that happening.

However, I will say this: the Groupon-like websites I worked with could have given me a lot more honest information. I’m willing to deal with losing money; a business owner must take risks, after all. But I feel strongly that they take advantage of small businesses. Here’s how:
■Taking a very large commission on the sales of vouchers. That’s 40-50% in my case. Meaning that for a customer’s $85 value massage, Stellar was paid about $20.
■Painting an overly rosy picture. Groupon, for example, claims 97% of businesses are happy with they deals they run. I have to wonder if they collect this statistic immediately after they pay the businesses.
■Not collecting statistics on how many voucher-redeemers become regulars.
■Steering you into making decisions that are in their best interest, not the small business’s interest. For example, I wanted to offer a deal value that was below the cost of a massage so that voucher redeemers would spend some money at my business. The TravelZoo rep told me people would respond better if they could “see themselves in an experience.” So I ran a deal that was for the full value of a massage.

Now I’m finding out I’m not the only business who’s had a poor experience running deals. In fact, there’s a lot more information coming out about Groupon-like deal websites:
■Groupon Was “The Single Worst Decision I Have Ever Made As A Business Owner” (Tech Crunch)
■Groupon anxiety (The Economist)
■Why Groupon Is Poised For Collapse (Tech Crunch)
■How Effective are Groupon Promotions for Businesses? (Social Science Research Network)

There are a lot of comments on these articles. Many people are able to see both sides. The commenters who fault only the businesses for their failure basically say the business owners should have figured it out. Either “your products/services weren’t good enough” or “your marketing wasn’t good enough” or “you should have realized the deal was bad for you.”

That last one has a little bit of traction for me. But, I can’t honestly say I wish I’d never done it. It was an expensive lesson that made me work super hard on customer service and retention! I don’t think I would have pushed myself so hard otherwise. I’m much better at it than I was a year ago. My non-voucher clients almost always return, and I get great testimonials from my work.

So where does that leave my customers with unredeemed vouchers?

At some point, I have to mitigate my losses. That point is now, while I feel I can still turn things around rather than declare bankruptcy.

Hopefully I’ve done a good job at explaining the situation without offending deal-hunters. I understand personal economics, and there’s no shame in finding great deals. I’ve had some unreasonable people come through the door with their vouchers, but mostly people leave very happy.

I am still doing my best to take responsibility without shooting myself in the foot. I will bend over backwards for customers who are interested in becoming regulars. If you write to me and say, “When can I get a series of Structural Bodywork?” you might find that I convert your unused voucher into a pretty nice discount (hint, hint).

Otherwise, my commitment is to redeem unused vouchers at the price that was paid for them (e.g. if you paid $79 for 2 massages and used one, it’s now worth $39.50).

If you write to me and say, “You should redeem my voucher because I wasn’t expecting to pay full price,” understand that it costs me real money. Also know that, hell, I GET that you can’t afford to pay $80 for a massage! (Guess which business owner who’s writing this blog made negative income last year?)

But, after doing so many massages essentially for free, I feel that my karma is in damn good shape. If I take a few karmic hits by leaving people unhappy, well… Again, there’s always risk when running a business. I’m not glad people are unhappy, but the alternative is worse.

So, what now?

A bit of advice. If you’re a massage business owner reading this, I suggest bypassing deal websites. I know they work for some types of businesses, but I don’t think the risk is worth it.

And if you’re a person who loves small, local businesses like I do, consider using deal websites only for businesses you truly want to become a regular at.

Thanks for reading. You can check out my new massage practice at

[Pete]

I just came across this post abour these deals, not sure if this was posted yet.


The Reason Stellar is Closing

Posted on June 20, 2011

Just in case this is copyrighted material and/or if anyone here is interested in more info regarding this post, can you please add a link to the site where it was posted? Thanks!