Our wellness center was the first in San Francisco to offer a massage Groupon deal. That was in June 2009. “Wow,” we thought, “that was cool—fast, easy money, with no out-of-pocket expense to us!” Cool indeed, until the phone started ringing off the hook and we couldn’t figure out Groupon’s system of how to track the buyers who were frothing at the mouth to come in as soon as possible.
In two days, Groupon sold 272 certificates for hour-long massages at our center for $39 each. We received a revenue share of 60 percent (negotiated up from their original offer of 50 percent), less a small credit card processing fee, which gave us our nice little windfall. But boy, did I learn a lot from that experience.
What is Groupon?
In November 2008, Groupon was the first company to offer what are now called Daily Deals. These online promotional and marketing services offer a discount that is available for a few days to their list of subscribers. Daily Deals are usually 50 percent, if not more, off the regular prices of restaurants, services, and events in and around individual cities. There are now deals in almost every major city in the United States. Groupon’s name comes from combining two words, group and coupon, because, in order to receive the deal offered, a specified number of people must purchase it, otherwise the deal is off.
New Groupon-like companies are coming onto the scene every day, vying for a piece of what may (or may not) be a lucrative business, depending on how you value a company, but the numbers are declining. In 2010, there were 430 “deal” websites in the United States. Now, there are only half that number.
Companies like Amazon, Facebook, and Yelp have jumped on the bandwagon, offering their own version of the Daily Deal. Interestingly, though, Facebook bowed out after only four months of testing and is not pursuing offering deals at all, and Yelp is scaling back its efforts. Google, however, is still cautiously testing the waters with limited offerings.
Our Experience
Since we were one of the first businesses to work with Groupon in San Francisco, very few consumers understood that first promotion. The customers were calling us directly to purchase the deal, not understanding they needed to go through Groupon’s website. We were given no instructions on how to track the purchased certificates; we were simply emailed a 16-page list of names of the buyers. Even Groupon’s staff was unclear about the entire system.
We quickly learned our $39 offer price was way too low. Because the discounted price was more than 50 percent off our usual rates, it attracted a large number of clients who were not in a financial position to afford our standard rates, even if they sincerely wanted to come back to see us. We did, however, manage to get about 30 percent of the Groupon purchasers to become repeat clients, and many referred their family and friends to us. I suggest keeping your deal price closer to your standard rates, even if you sell fewer certificates, rather than attempting to sell a higher number of certificates at a greater discount.
We also learned how important it is to include details, such as appointment availability, in the fine print of the deal. We had many people who were disappointed they could not get an appointment as soon as they wanted.
Since the time we ran our first Daily Deal, we’ve run five more with various companies. I’ve entered into negotiations with many others, but for several reasons decided against working with them. I have also fielded hundreds of calls, emails, and online inquiries from therapists across the country asking whether or not a solo therapist or massage business should participate in a deal, the best way to handle a deal, and how to handle being swamped once a deal has run. For us, we feel we have fine-tuned the system of offering these Daily Deals and perfected how to guarantee the best return on the experience. Will a Daily Deal work for you? Here are some things to consider before you jump in.
Should You Do a Daily Deal?
This question is a big one among therapists and can be very controversial. Many therapists and other small businesses feel it is a great way to stimulate business by getting some income and new clients. Other therapists feel it creates a “coupon culture” in which consumers will never again want to pay full price and clients are only looking for the next cheap massage.
I believe a deal can be beneficial for most businesses, but it absolutely needs to be structured appropriately and in keeping with your brand.
Benefits of Running a Daily Deal
When you agree to run a Daily Deal, the online company does all the work to create effective promotional campaigns, work that many small businesses don’t like or don’t know how to do. Once you have negotiated all the details with your account manager regarding the offer, the price, and the date your deal will run, they create the advertising copy, handle the artwork, run the promotion, handle the orders, and manage any refunds or customer service issues. After the deal ends, you and the deal company split the revenue.
I encourage you to think of this form of advertising as a loss leader, which means the goal is to get new clients in the door without spending a lot of money. You might even lose some money, but you will never have any out-of-pocket expenses you can’t afford. Even if no certificates are sold, you will owe nothing but will still have received exposure in the process. Following are some additional benefits to consider.
Pay for Performance
Traditional advertising is paid in advance, with no guarantee of any sales or new customers. Daily Deals offer “pay for performance,” which means you only pay once you know exactly how many new sales it has generated for you. In fact, you don’t even pay them directly—their fees are deducted from the total revenue generated from the promotion prior to them issuing you a check.
This is a huge advantage for a therapist or a small business because there are no upfront costs and, although you are selling your services at a discount, you are guaranteed the revenue.
If you are currently doing any paid advertising for your business, you are aware there is a cost associated with it. The cost you incur to run the ad to get a new client will offset the payment the client gives you for your service. Let’s say you put together some promotional flyers that cost $50 to print and distribute. If your promotion results in five new clients, your cost per client acquisition was $10. This means if you charge $100 per session, you just gave a session for $90.
Of course, some advertising doesn’t bring in even one client, so you must deduct the full advertising expense from your week’s or month’s earnings. If you have a budget allotted for your advertising, I encourage you to see the huge benefit that paying for performance gives you.
Exposure
Even if your offer doesn’t sell very well, by having your company promoted online you still get additional visibility. Many deal sites send your business name, phone number, and website directly into their subscribers’ email boxes, and have relationships with other media outlets. This can mean hundreds of potential clients hearing and reading about your business, which can have great impact, even if it is not seen immediately.
Breakage
Breakage refers to the many certificates that are sold that will never be redeemed. This number is estimated in the deal industry to be around 12 percent of the total sold. You get to keep the money on those certificates that someone has bought, without doing the massage. If someone wants to redeem a certificate after the expiration of your deal, I encourage you to honor the price they paid for the certificate as a credit toward any full-priced service you offer. This will keep them happy and hopefully result in a new client.
What’s the Catch?
By now, you’re probably thinking this all sounds great: you get free promotion for your massage business, they do all the work to set up and run the deal, and you only pay them based on the money that comes in from certificate sales. So what is the catch? I think the “catch” is minimal, but here are a few things to consider:
Since the business model is pay for performance, these companies will ask that you give them an incredible package to offer their list so they can sell hundreds of them. Remember, they make more money if they sell 500 than if they only sell 15.
Yes, there will be a percentage of new clients who are only looking for the cheapest massage and will never become a return client for you. This is the nature of the industry, and is not worth worrying about.
Some people think there is “deal fatigue,” where subscribers (who may be on more than 20 email lists) get bombarded by daily offers and start to unsubscribe or ignore these deals.
Others feel that offering discounts cheapens your business in the client’s mind. While this may be true for some of the lower-priced deal websites, there are also a number of higher-end websites that cater to only the most exclusive businesses.
Once the Clients Come In
Once you’ve got these new clients in your clinic or studio, it’s your chance to wow them—I call it “service vetting.” If they are looking to build an ongoing relationship with a therapist, they will be interviewing you, and they will continue to try deals until they find the perfect fit.
Susan Epperly, a clinical massage therapist and co-owner of Tiger Lily Studios in Austin, Texas, has successfully used a number of Daily Deals to grow her practice. “Be open to working on clients from all walks of life, even those whom you think are not your ‘ideal clients,’” she says. When it comes to turning discount voucher clients into long-term, repeat clients, the most important strategy is to “give ’em all you’ve got.” Offering a deal will put new clients on your table, but that really only provides you with an opportunity to audition for those clients. You want them to leave thinking (and talking) about the exceptional value they got and their eagerness to return. “A deal gives new clients an opportunity to try out an MT’s services at a discounted introductory rate. Over 60 percent of our discount voucher clients, after having tried us out, have returned for additional sessions at our full, regular rates.”
What To Offer?
To get started, I suggest creating an offer for one of your lower-priced services, such as a 30-minute massage, or a package of a 30-minute Swedish massage with aromatherapy and a foot bath, for example. Your account manager will try to get you to offer a higher-priced service because they make more money, but my suggestion is to keep it at something that retails for less. That way, even with the price reduction you will not lose much, plus you will still get new clients. Once clients love you, or even at their initial visit, they can then choose to upgrade, or add services or time, and you will not be obligated to split the revenue for it.
See if you can create a package similar to this “Pamper Party”: Total Package Value—$84 ($54 for a 30-minute massage, $15 for aromatherapy, and $15 for a foot bath). Customers pay $44, which is 50 percent off. When they come back, they know your regular rate is $54 for the 30-minute massage—not a big jump from what they paid for their deal certificate!
One of my colleagues, Paul Brown, and I were involved in an online discussion on Massageprofessionals.com/forum giving advice to other therapists about offering deals. “I did a Groupon voucher as a solo practitioner last November and sold 200 vouchers for a half-price hour massage session,” Brown wrote. “The first thing I did was limit the hours that I accepted [deal] clients—[I] eliminated evening and weekend appointments for them so I could continue to see my existing clients. I offered a small discount on their next massage if they booked one right then at the end of their session within two weeks. This helped me convert many, many of these clients to become regulars. Finally, the voucher expired, and I have been booking some of the expired voucher clients using the voucher as a gift-credit applied toward a full-rate session instead of for a full session—one of the expired certificate clients booked a two-hour session with me recently and paid the difference—which means I made money off of that voucher. Other clients are doing the same thing. Almost 30 percent of the vouchers expired, so that’s cash in my pocket for no work. Granted they will have to be honored as coupons if they decide to book a session, but that means that I make almost all of the money I would have made on a massage session,” he says. “I rebooked 20 percent of the clients—that’s a fantastic return on my investment, and I look forward to these new clients for a good long time to go.”
What To Do
Get sample ideas. Look on some deal websites (Bloomspot.com, GroupSwoop.com, Joffer.com, LivingSocial.com, TownHog.com, TwoBuckDuck.com, and WeGiveToGet.com, to name a few) and see their past offers to get ideas of what you can offer.
Decide how many new clients you can handle. There have been numerous reports of solo practitioners and small businesses being swamped with too much business and ending up with many disgruntled clients who complain in online reviews.
Develop your offer. Decide how to position your offer, either as a specific service, such as a $95 hour massage for $49, or a general discount on any of your services, such as $100 worth of services for $50.
Define your fine print. I suggest you limit the number of certificates each person may purchase; allow them to purchase a certificate as a gift; put a minimum client age; have a six-month or one-year expiration date; and specify the hours they can schedule with you. If you live in an area with tourists, restrict the deal to local residents.
Determine your upsell. Once you have new clients in the door, what will you do to keep them coming back to you? Come up with a really irresistible offer that they can’t help but say yes to, and don’t limit it to just discounts. Remember, when you knock their socks off with your ability, service, skills, and warmth, these people will hopefully ignore the new deal offers that arrive each day in their email, knowing that you provide not only a good value, but exceptional results.
Here to Stay
Everybody loves a great deal. These Daily Deal companies are here to stay, and as our economy ebbs and flows, so will the way the deals are structured. Business owners (like you) are becoming savvier about working with coupon companies. Hopefully these companies will continue to be a valuable advertising resource.
As you can imagine, massage is one of the most popular services being offered in Daily Deals, so we as massage therapists have the upper hand. We have the ability to negotiate well, package our services in ways that best reflect our skills and needs, and price them accordingly. Hopefully, the result will prove profitable for you with new and returning clients coming in your door.
Irene Diamond, RT, is an educator, public speaker, and business coach who enjoys enlightening therapists, fitness trainers, coaches, and other “thera-preneurs.” Diamond will be inducted into the Massage Therapy Hall of Fame in 2013 for her work with Active Myofascial Therapy, and her online business resource, SuccessfulMassage Therapist.org. Reach Diamond at Facebook.com/TherapySuccess, Twitter.com/MassageResource, or www.thediamond method.com.
• You are in the driver’s seat. There are many companies competing for the best deal to keep their subscribers happy, and they need you more than you need them. If you don’t like the deal, move on to another company who can offer you a better arrangement.
“If I’ve tried a massage place through a deal, and got a good massage that helped me get rid of pain that had been bothering me for awhile, I would definitely continue to go to that business again. For me, good service and a positive outcome always trump just getting a deal, and I’ve found the bulk of our company’s clients feel the same way, too.”