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

[Jenn@AttunedMotion]

So one of the places I work part time ran a groupon special. It actually went over very well (Selling over 600 groupons @ $30 a piece, for $70 worth of services), and we had 75 people redeem them our first week. Out of those, 30% rebooked services, 60% bought retail, and 60% upgraded their service or added on additional services. We are a larger salon and it has worked out pretty well for us. We don't get paid much for these those, ($7.50 for an hour massage, plus gratuity, which has been $15-$20 for most clients), but I have a limit of 4 a week, and of those 1 out of 3 have upgraded, resulting in more money! yeah!), but we've rebooked a few people, had great exposure, received quite a few referrals, and have had the opportunity to meet many new clients. Now I'm not a big fan of discounting my rates, especially not that cheaply, but I am hoping that this special will net me some new regulars, and hopefully spread good word of mouth! I'll update again in a month or so and see what the verdict is!

[jyoti]

I'm really sorry that didn't work out for you Angela! I totally agree with you: if you were some big spa you wouldn't need them! I'm not sure what their logic is, but I definitely see things from your point of view.

But that really kinda stinks, because here's a resource that really could've gained you some more exposure.

Everything happens for a reason, though. There's probably something else out there that's better

[JLWmassage]

I just did my second deal with http://www.thlocaldeal.com

It is a lot smaller co. than groupon and they only promote small businesses in my area. My first deal I sold 18 vouchers. The second time around 30 vouchers sold and 100 hits on my website. Clients have been giving me a $20 tip so I don't feel like I have been working for free so much. My goal is to sell 100 vouchers

[ThatsTheRub]

My area isn't offering any of these yet, but I've been watching them for sometime and am interested in giving it a go. I am torn at the 25-percent net, it seems a little too low. On the other hand if I can rebook even 25% of them it makes it worthwhile (our center has a rebook rate of over 85%, so I'm fairly sure I can do 1 in 4).

And then there's those who wouldn't do it at all if not for the discount. I don't like these people as clients as a rule anyway, so it's a little tough to swallow getting a whole bunch at once. But would it get our name out there a little more? Yes it would. Would it be an utter waste? Not close. so it's still on the positive.

However I'm not sure I could see doing it more than once a year.

[Pete]

One thing about these deals too is that there are people who buy them and never use them (kinda like gift certificates) which increases the revenue per session in the long run.

[ThatsTheRub]

VERY TRUE! I'm curious what the redemption rate is/isn't. a lower redemption rate REALLY drives up profit. Anyone who's done this have numbers?

[JLWmassage]

VERY TRUE! I'm curious what the redemption rate is/isn't. a lower redemption rate REALLY drives up profit. Anyone who's done this have numbers?

My first deal I sold 18 and I still have 6 out & it expires in 2 weeks

[Timedess]

Interesting. On Monday, I got an email from a company like groupon (only much smaller and more local) that was advertising a special for a small, family-owned candle business whose owner I know (which is also how I came to be on their email list, I figure). It was a great deal: get $20 worth of products for $10 (and she would get $5 of that, I now know).

Hubby and I were out in the middle of the day today, in between picking up some books and an office appointment, so I asked him if we could stop by the candle place. I asked her about that deal. I'd tried to get in on it, but it came back "not enough vouchers sold". She said people thought they had to go to the store, so there were tons of people at the door on Monday when it came out. Unfortunately, they, like we, are closed for business on Mondays! She said that with the particular company she did that with, the breakdown is the same as y'all have mentioned with regard to groupon, etc.. But in addition to the email sendout, the owner of the voucher company also has another, "mommy-oriented" web site she lists the daily deals on, as well as affiliation with a local radio station, where the deals are also mentioned. She told me that it cost her NOTHING to get ALL THAT EXPOSURE. She said that she really didn't *expect* her quota to be met- she intentionally set the quota at a pretty high number. But for her, it was more about the exposure for her than the sales. Imagine if she'd actually been open on Monday, when all those people showed up!

She thought that something like that deal might work out very well for us. I was thinking, if I made the vouchers for something that we could "price up" (meaning, added value services/items that are not on our usual menu of services, NOT jacking up prices just for the deal), then it might be worth it. No way would Hubby agree to do an hour massage for under $15. OTOH, perhaps a half-hour massage deal, which would net us under $9.00, could bring in some upgraded sessions.... Hmmmm......

[Timedess]

One thing about these deals too is that there are people who buy them and never use them (kinda like gift certificates) which increases the revenue per session in the long run.

Hummm.... this is a good point, Pete. However, I wonder if the State would also SEE these vouchers as gift certificates. The escheat laws here in Texas state that if a GC is sold with an expiry date and is not redeemed before it expires, we have to turn over the $$ to the State as "unclaimed money". So we don't put expiry dates on our GC's.

Anyone have any feedback/ideas about whether or not these vouchers would be seen as GC's? They're not coupons, which we CAN have expire- no money is exchanged for coupons, whereas GC's are indeed sold.

[JLWmassage]

My understanding is you get to keep the money bc is it considered a coupon

[Pete]

One thing about these deals too is that there are people who buy them and never use them (kinda like gift certificates) which increases the revenue per session in the long run.

Hummm.... this is a good point, Pete. However, I wonder if the State would also SEE these vouchers as gift certificates. The escheat laws here in Texas state that if a GC is sold with an expiry date and is not redeemed before it expires, we have to turn over the $$ to the State as "unclaimed money". So we don't put expiry dates on our GC's.

Anyone have any feedback/ideas about whether or not these vouchers would be seen as GC's? They're not coupons, which we CAN have expire- no money is exchanged for coupons, whereas GC's are indeed sold.

I think it depends on the state. I'm looking at doing something similar in my practice currently and after the expiration date, I will treat these like GCs and honor them not for the original deal, but apply to purchase price toward a service, which should satisfy the state's escheat laws.

[Pete]

...perhaps a half-hour massage deal, which would net us under $9.00, could bring in some upgraded sessions.... Hmmmm......

Personally, I think this is the best way to approach this type of deal. This way you minimize the cost of the program while creating another revenue stream (upgrades).

I've done similar programs to this and I've always only ever promoted 1/2-hour sessions for that reason.

[Pete]

Spaboom posted a couple of interesting articles on their blog recently:

http://www.spaboomblog.com/2010/dont-se ... ount-devil

http://www.spaboomblog.com/2010/if-you- ... on-groupon

[Timedess]

I think it depends on the state. I'm looking at doing something similar in my practice currently and after the expiration date, I will treat these like GCs and honor them not for the original deal, but apply to purchase price toward a service, which should satisfy the state's escheat laws.

So, um, how would you do that? care to elaborate, with a "for instance", please?

[JLWmassage]

You are not selling the vouchers. It is another party selling them, so that would mean the state would have to get money from the co. and you for the unsold vouchers. And the way it was explained to me bc another party is selling the vouchers the state gc rules don't apply

[Pete]

You are not selling the vouchers. It is another party selling them, so that would mean the state would have to get money from the co. and you for the unsold vouchers. And the way it was explained to me bc another party is selling the vouchers the state gc rules don't apply

This may or may not be true in ALL states so I would definitely check with local laws and ordinances.

[JLWmassage]

You are not selling the vouchers. It is another party selling them, so that would mean the state would have to get money from the co. and you for the unsold vouchers. And the way it was explained to me bc another party is selling the vouchers the state gc rules don't apply

This may or may not be true in ALL states so I would definitely check with local laws and ordinances.

I just did some digging for my state and called consumer affairs. These vouchers are not bound my the state gc laws bc people are not buying them at full value, it is being sold through another party. And the party selling the vouchers has the right to set their own terms and conditions

[JLWmassage]

http://livingsocial.com/

Here is another co. to look into

[JLWmassage]

http://www.sfgate.com/cgi-bin/article.c ... 1DLA5T.DTL

The pit falls of Groupon

[RelaxandRejuvenate]

part of the problem with Groupon and the rest of them is the "one size fits all" mentality of their discount plan.

They don't seem to be interested in promoting anything that is less than 50% off. This creates 2 main problems.

1) it conditions an entire segment of the population to only purchase on a severe discount and can lead to cannibalizing your existing client base (which is why we would never participate in SpaWeek)
2) 50% off economics only work for certain business models, those with low variable costs, and the spa/massage industry is not one of them

Steep discounts work well for restaurants for several reasons:
A) Food is a small % of the selling price, usually about 20%. Discounting 50% still leaves you a Gross Profit
B) Labor costs are a small % of the selling price -- Minimum Wage for tipped employees is under $4 an hour. The customer is paying for the waitstaff through the tips. And studies have shown that guests on discounted/free meals or services tip at above average levels.
C) Alcohol is excluded -- usually by law -- and that is one of the highest profit items on the menu. So long as a client spends on alcohol, the restaurant maintains relatively high profitability despite the steep discount on the food.

[massage2ullc]

If you can afford to do this it is great exposure. Try to bargin with them on the cut they take. Some may be willing to work with you if you provide them referrals. That is what I'm doing with http://www.youryoupon.com

[kinespirit]

This is a really interesting topic... and escheat law principles COULD have a major impact on the way bodywork or other private service studios operate. But, I found something for NY state that lets us Empire Staters off the hook... People in other states may want to see if there is an equivalent piece in your laws.

1) yes "gift certificates" for services are covered under escheatment
http://bit.ly/cZPfGr (look for New York State)

BUT

2) Services pre-bought at a discount off the normal price of those services are not considered gift certificates so long as both the discount and the expiry date are clear.
http://bit.ly/ahnMCR (look at the very last sentence, that defines what is NOT a gift cert).

So if you sell 10-packs or do Groupons - you are almost certainly doing so for less than the standard retail price. IN that case, if you clearly specify the discount amount and the expiry date - then these are not gift certificates in NY state and the escheat laws do not apply.

[JLWmassage]

I thought I would give you all an update. I have done these deals 3 times now. My first deal I sold 18 the second deal I sold 30 and the third deal I sold 80.

Now the return rate for clients off of these have been around 18% and of those 18% return clients 5% of those becomes a regular client. So I am planning on 22 of these Local Deal clients returning

[JasonE]

I thought I would give you all an update. I have done these deals 3 times now. My first deal I sold 18 the second deal I sold 30 and the third deal I sold 80.

Now the return rate for clients off of these have been around 18% and of those 18% return clients 5% of those becomes a regular client. So I am planning on 22 of these Local Deal clients returning

Now THOSE are the kinds of statistics you want to know! Great job tracking and analyzing your outcomes!

[JLWmassage]

http://writingabluestreak.com/2010/09/w ... enerosity/

Here is a good blog post on the subject