Several months back a new massage therapist approached me and asked about participating in Groupon. She had done some research and it sounded like a great way to get new clients and make bundles of cash. So I looked into this marketing campaign for my clinic. For those of you that have not heard of Groupon, it is a group coupon that saves you up to half off the regular fees for restaurant food, services like massage and yoga, dental procedures, etc. After watching their video on how Groupon works, it sounded too good to be true. Ya know what? It was.
In order to participate in Groupon a business must agree to discount their services by at least 50%. Then the business has to further agree to give Groupon 50% of the already discounted fee for their marketing services. In my case we would be discounting a massage from $60 for an hour, to $30. Then we would have to give $15 of that $30 back to Groupon, which means I would be making $15 an hour for a 60-minute massage. Now factor in if you have employees on a percentage split and you would be making $5.25 and the independent contractors would be making $9.75 for a 60-minute massage. If you want to really use Groupon as an effective marketing tool, they recommend you do the "Deal of the Day".....which also has a nice fee attached. This great deal did not sound so great to me so I declined their offer. When they called back a few weeks later, I declined their offer again.
So this week when a Groupon sales associate called me to explain all the benefits of this wonderful (heavy sarcasm) deal, I had lots of questions and hypothetical situations for her. Since it was obvious that my two prior rejections was not sufficient enough for them to take me off their prospective client list, I figured I might as well give them all my reasons for saying "No thanks"...... but this time with feeling.
Question 1: How exactly is a business supposed to be thrilled with making one fourth of their regular fee? Well according to all the Groupon hype, you will be sooooo busy with all this new business you attract from your Groupon, you will easily make up that lost revenue with all your new clients. She told me more clients means more money. Sounds good, but that led me to my second question.
Question 2: Exactly how many of these new clients do you think I will retain if they have to pay full price? I told her that I had friends in the salon industry that did their awesome deal and only kept TWO clients out of the 500 coupons they sold. She said "Well......it does take time to see return business." My reply was "Surely, but that is a LOT of free work for two returns and it cuts into your established client's appointment times. Do you suppose the other 498 people waited for the next half price coupon? I do."
So Questions 3 and 4 were: How are you going to find appointment times for all the new clients plus your already established clients and what happens when your established clients want to participate in this coupon extravaganza? Groupon would have you believe that you could do all this new business without a hitch and they wondered why I wouldn't want to include our loyal client base in the savings. I cited another therapist that had used Groupon and told her that he was bombarded with his regular clients grabbing up the half off coupons and subsequently he lost money from the clients that were already content paying his full price. So not only did he lose money on the new business but now he was losing money on his established client base too.
Groupon Gal wanted to tell me how mistaken I was about what Groupon could do for me and argued that it was bad business for not discounting fees for current clients. It was at this point I decided to unload the Wrath of Kim. I told her that bad business was doing something that costs you money with very little-- if any return for your efforts.....period. I told her that her pyramid scheme might be great for therapists that had little to no business, but for a clinic that stayed booked there was nothing she could tell me that would make me think that my making $15/hr and paying them $15 per coupon was a good thing. I let her know that I kept my clients happy by offering in-house discounts and bonuses, and that I didn't mind taking less to reward my great clients--it was having to pay Groupon half of the discounted fees that I take in that I found excessive and absurd. GG was undaunted and wanted to share success stories of other therapists in my area so I just cut her off and said I was glad it worked for them but I was satisfied with my business and felt my own marketing and terrific word of mouth was serving me just fine.
For the record I am not adverse to doing free or discounted massage to attract new clients---I do this on a regular basis with salons, fitness trainers, medical professionals, and others with whom I network and do cross-referrals. The difference between this networking/advertising and Groupon is none of my contacts ask for money in return for their recommendations. As for rewarding my clientele, for every referral they send to me I give them 30 minutes of free massage and I offer 30 minutes of free massage during the week of my client's birthdays, which can be redeemed in stand alone massage sessions or they can add the minutes to another massage to get a longer massage at a cheaper price. Several times throughout the year I also offer free upgrades for hot stones, cupping, paraffin dips,etc and I run multiple promotions that offer a 90-minute massage for the price of a 60-minute massage. Each of my discounts is a minimal loss of revenue and time, but still a huge hit with our clients. I advertise my deals in newsletters, door to door sales, and Facebook. None of these marketing strategies reach as many people as Groupon but I am able to reach several hundred contacts directly and it is essentially cost-free.
In closing, I am not saying that Groupon doesn't work well. Obviously it does work well for businesses that can afford to take a cash loss for advertising and still stay afloat or for start-up businesses that need an instant infusion of new clients. I simply feel there are better ways to market your business without having to seriously undersell your services.
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