Why Groupon Is Dangerous For Spas
If you’re a spa owner, you’re probably well-aware of Groupon. In case you’re unaware, it’s a company that has built a massive list of email subscribers who volunteer to be notified of daily deals (“Groupons”) for local businesses. According to the Groupon sales rep I spoke with, spas and salons are the #1 “target” for their company, mainly because hair removal (believe it or not) is the best-selling service on Groupon. Therefore, it should come as no surprise that Groupon is “hot and heavy” pursuing spas and salons all over the U.S. If you’re a spa owner, chances are good you’ve already been approached by Groupon, or maybe you’ve already done a Groupon at your spa.
Groupon’s pitch to the spa owner is a seductive one: there’s no up-front payment to participate. Groupon doesn’t get paid unless people on their email list actually buy the Groupon. However, even though they DO get paid 50% of the selling price when the product sells – which goes straight into Groupon’s bank account – they pay back the spa owner their share over 3 months…a practice they say is necessary to make sure they are able to deal with returns. They tell you this up-front. That’s not why I have a problem with Groupon…but it’s worth noting.
So, at first, to the spa owner, it seems like a “no risk” proposition. Nothing could be further from the truth. There is a HUGE RISK that Groupon doesn’t tell you about, and many spa owners are discovering the ugly truth the hard way.
Here’s what happens – obviously, since there’s only one daily deal, and Groupon won’t make money unless the product sells, they push the spa owner to give a DEEP discount on a low-priced service. Case in point – one of my medi spa clients who tried Groupon over a year ago started with an offer in the $150 range, and hardly anyone bought it. However, when the Groupon sales rep convinced her to offer a $75 medical facial for half-price…they sold 2500 units in a single day!
And these crazy numbers aren’t an isolated incident. Another spa I spoke with sold 2600 in a single day. So, at first, Groupon may seem like a marketing juggernaut – an instant way to get hundreds, even thousands of new clients at once. The sheer numbers are impressive, even hard to believe. You would be hard-pressed to find ANYTHING that could generate 2000+ sales in a single day, even with a $50,000 advertising budget!
Does Groupon generate a LOT of new clients? Absolutely! Are they the type of clients you WANT? Absolutely NOT!
Groupon Violates Fundamental Spa Marketing Principles
A key principle to marketing is the Market to Message to Media match. Meaning, in order for your marketing to be successful, you must attract the right market with the right message using the right form of media. Get one of these wrong, and your ad will fail, or certainly not perform as well as expected.
For instance, if your ideal target market is serious male athletes interested in sports massage, you wouldn’t advertise that message in the local high-fashion women’s magazine. Right market, right message – wrong media.
I’ve never met a spa owner who said their ideal market were coupon-clipping housewives who cannot afford to pay full price for a $65 facial…much less a series of Microdermabrasion treatments for $350, etc. Now – I don’t mean to say that of the millions of people who use Groupon, that all of them are broke with little to no disposable income. Even rich people love a bargain. But why would you intentionally go after a list of people who were attracted to Groupon’s tagline “Get 50 to 90 percent off the best stuff your city has to offer.”
The key question when you market to gain new clients is this – is the purpose of getting a new client to make a sale, or to gain a repeat client? Then ask yourself this – IF I gain this person as a client, can they afford to keep coming back to the spa? If they refer their friends, will they be the type of clientele we’re looking for…or will their friends ALSO be a bunch of coupon-clipping housewives with no disposable income who are constantly looking for a discount?
BUT – with all the ways that exist to find “ideal” clients, a spa owner who truly understands how marketing is supposed to work would NEVER consider Groupon.
In the all-important Market to Message to Media match . . .it’s the wrong market. In fact, it’s not even close.
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Facebook comments:
Nice article. I just put one up about the same subject with a different focus at http://discoverspas.com/On%20My%20Mind/14_More_Lessons_on%20How_Not_to_Run_a_Spa.shtml.
You noted, “a spa owner who truly understands how marketing is supposed to work would NEVER consider Groupon.” I agree. Based on my very limited data sample, I have concluded that spas attracted to Groupon and the likes are spas that are in crisis and cannot attract repeat and loyal clients with their current quality (or marketing) systems.
Kind Regards,
Julie Register
Owner / Editor
DiscoverSpas.com
http://DiscoverSpas.com
Comprehensive On-line Resource for Spa Consumers and Spa Professionals for 14 Years
As a business owner and a person “You do the best you know how to do and when you know better you do better.” We know better now and we learn from our mistakes. These daily deals are not a deal for the spa owner and their loyal staff! It was a one time deal for this spa owner.
Groupon and companies like it are also breaking existing laws. Laser hair removal is a medical service and comes under the corporate practice of medicine standard. One law in this standard forbids “fee splitting” which Groupon and others obviously do. I urge everyone to write to their States Attorny General to go after these companies.
I have used Living Social and Groupon for my Spa marketing a total of three times and our retention rate of the 276 “coupons” sold was less than 1%. In addition, I know Spa, Sole Proprietors, that rely heavy on these marketing options and in less than one year they have found themselves prisoners of their outstanding liabilities.
We also were early embracers of Groupon in a 1 time microdermabrasion special. The sale day was exciting for the staff and the entire staff rolled out the “ultimate spa experience” for our coupon clippers. Our return of this customer was 28% over 3 months, and after 6 months registered not measurable. The spa staff attitude and dynamics changed dramatically, since retention is tied to their income and usually measures 85%. The coveted, deeply marketed, educated “Mona customer” was not in this group of new clients. We feel strongly that the influx of coupon clippers insulted the integrity of our highly trained and skilled spa staff starting trouble with their retention and income. A year later, our tried and true spa marketing is generating a beautiful guest experience for the clients that truly are seeking the products that we offer with substantial value.
Hopefully, everyone that would like to enjoy a spa visit will be able to with a perceived value of the service sector of business. Quality and experience in service is just not inexpensive. When Mercedes-Benz, Rolls Royce and Ferrari sell coupons to test drive their vehicles for the day, I may take another look at coupon marketing.
Hi,
I wanted to drop you a line and mention that Groupon was beneficial to my new,skin care studio. It was a great introduction to the community, the promotion sold well, thereby a large influx of potential clients graced my doorway. I sold an impressive amount of products and was able to retain a large amount of clients for additional services; waxing (at the time of the promotion or booked later)chemical peels for clients with aging or sun damaged skin, and clients with acne (my specialty) rebooked for several appointments for acne clearing peels and purchased the acne line that I carry.
Now, on the other hand, I would not indulge in this type of promotion regularly. There is a lot to be said for the client who is attracted to and can see value in your regular full price services.
PS. Love your videos on youtube! I also downloaded your Spa Marketing book. Very informative.
Hello,
Our Salon has been bombarded with calls from Groupon, Living Social, Wag Jag etc. When they first contacted us we gave it some serious consideration, but after doing some research it became perfectly clear who the winners in the scenario would be! The saying “If it sounds to good to be true then it probably is” is sooo true in this case. I agree with Mona in that the integrity of service that any good salon prides itself on, is compromised. How can you perform a quality service for someone who can’t appreciate it enough to pay regular price for it? Also, when trying to accomodate the Groupons it seems to me that you would be filling time slots that would them become unavailable to regular clients, which is probably the biggest downfall.