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Living Social emailed me today…

by Coach Christopher · 13 comments

So yesterday I cringed when I say a solo-therapist renting in some low-rent office building throw up one of those free websites so he could offer his "deal of the day" of a $15 facial. I can only assume "Jesus" (& partner) thought they could get rich as salon spa owners by opening their own place and using Groupon/LivingSocial to get them all the business they need. No need to work for 50% and let some "greedy" owner keep the rest for their hard work! Or, God forbid, work for $20/hour for a "super-greedy" owner. Jesus is now living the good life. Living social sold over 800 of his services (most 2 at a time, so to 400 clients). He'll be getting a nice, hefty check for around $6,400 ...BUT, it will take him 1,00 hours (THAT'S HALF A YEARS FULL-TIME WORK) to redeem all of these, which means he's earning about $6.50/hour. SO HERE'S WHAT THE LIVING SOCIAL REP EMAILED ME: "Yesterdays deal on LivingSocial, a salon, sold 861 vouchers in one day. Most subscribers purchased 2 vouchers each, so she gained about 430 new people who will walk through her door, love what she has to offer and become a long term client. Not all will stay, but if she retains 20% she has gained 86 new loyal clients who will use her services over and over through the year. How much revenue does 86 new customers mean to your business? When was the last time you didn't have to write a check to introduce your business to 85,000 opted in subscribers right here in Colorado Springs and see those results? Have you ever done traditional media and been able to track what it does and see it produce 86 long term customers? I would love to talk to you about featuring you on LivingSocial, do you have 10-15 minutes?" My reply you ask? More passionate than professional I'm sad to say 🙁 "You mean Jesus who doesn't even have a spa and will be working for minimum wage for the next year to cover those? That was the most disgusting thing I've seen. You're recommending solo's who are renting space in a run down office building and have no clients. They'll be out of business within the month and you'll have to not only refund them, but deal with customer service issues (since you advertised it as a spa and it's not). Then there's the whole thought that these will be repeat clients. Why on earth would you think that? Oh, right, they'll love me so much they'll say "forget that new $15 offer from LS, let's spend $87 at my new spa"...please. Most sales would be from our own clients anyway. Take the power of your list and do some GOOD with it. Don't prey on solo's who have no idea about how to run a business. Don't send clients to a non-spa, saying it's a spa. Instead, go after places who can afford to add new clients at LITTLE cost, like movie theaters, yoga studios, gym's, paintball fields, bowling alleys, comedy clubs... not spas who's coffin lid you just nailed on tight. You should be ashamed." ...it continues back and forth after that, getting uglier on their part (name calling is always a great way to get new clients I guess). Was I too hard on her (Amberly)? Comment below via facebook (or below that via the blog) and let me know. "Who Loves Ya?" -Christopher
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Anthony Busso

Not a fan of these types of sites. They want me to offer my services at 50% off or greater then they wantto keep 50% of the profits it generates… so now I just sold a ton of services and are only making 25% of the potential revenue. On top of that I have to pay the service provider there comssion. Now those “86” new clients I aquired cost me money and I have to digg out of the whole before it becomes profitable. I think people are getting dupped into these deals becuase they see a surge in traffic and a jolt of revenue. But when they calcualte the long term effects and cost, these deals cost owners money. They group deals can work if you run your own or have a product to sell that yu picked up very cheap or even for resturants because people usually dine with someone or but drinks etc to make the service more profitable for them.

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Donna

At first I thought it was a great deal! Only 20% of the Groupon or Living Social clients rebooked! What I am seeing, are these clients just going from spa, to spa, to spa just to get their deal. It is killing us! They have about put me out of business!

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TW Atlanta

I have mixed feeling about the Living Social/Groupon deals. I am a single operator skin care therapist in an area heavily concentrated with spas. I ran a deal for my business as a way to “get my name out there” a few months ago and have seen about a 20% return rate so far.

Pros: I use an online booking service that prompts guests to write a review after receiving their services. Because of this feature, my reviews have increased significantly, resulting in an increase of clients who have paid full price for their services. Fortunately, the deal I ran was through a much smaller company than Groupon or LS. I only sold about 75 units (some 2 per person), which was a much more manageable number than what I would have sold had I used Groupon.

Cons: A friend of mine, who is also a single operator, ran a LS deal that sold over 1K units. It took her a year to redeem all those vouchers! The last time I saw her, I asked how her retention rate was and she said that a lot of the clients were coupon chasers and the return rate was less than 20%.

Lucky for me, I ran a waxing deal, which is a low-cost service. If my promotion was for facials I would have been in big trouble. I’ve been contacted by LS and Groupon since I ran my deal and have declined their offers. I consider myself to be one of the “lucky ones”. If you are considering participating in one of these deals, please consider the risks and negative impact it could have on your business.

Thanks for the post, Chris! Good food for thought.

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Lori Hoyt

I think Chris may have even recommended something like this before – but the only way to “gain exposure that only Groupon or LS can provide for (ahem) Free” is to write an offer so bad that no one will buy it. Still have the same exposure right? We do not participate in these deals, but we do reward our current and returning clients with similar specials. Our most recent special was a $40 pass along gift certificate to existing clients for $10. They pass along to a new client (someone who has never been to Equilibrium) as a gift. New client comes in (90% upsell tracked) – and as is customary – the existing client gets a $25 credit to their internal account for the referral. win.win.win. Clients love it. Do not undersell your services. We haven’t been brave enough to use it in public ads, but we do have mouse pads that say ” I fix 50% off Laser specials”.

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Anonymous

That’s a great promo. Daily Deals are very “pushy” on what you offer, they know what sells best. You just need to either (simply put) offer a mini-service you can upgrade, or a maxi-service that has a lot of “low cost, high value” built in… this is a twist to what Peggy Wynn suggests that these daily deals will increase inflation as owners raise their prices to compensate for giving away things at half off all the time. I’m writing a report on how to do a daily deal successfully, but still don’t recommend doing them because: 1. They devalue our industry 2. They hurt the small business owner 3. They teach the nation NOT to spend = bad for economy (good for them).

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Dawn Tardif

I posted a cleaver article that was written as a satire of Groupons and I feel it hots all the points that need to be seen clearly by small business owners. I say small business owners because usually our overhead is high and our profit margin is low and if you decide to do any of these coupon sites you need to recall business 101.

Rule #1 You will never gain a client after you have given them an enormous discount. That type of shopper will look for the next best deal.

Rule #2 Value your service and honor your market. You hurt us all when you discount a service. Price is not what matters to most consumers. If you are wondering what does matter, than you need lessons in customer service.

Rule 3# Know your cost of providing your service to each client…your overhead, expenses, understand your numbers. Most small businesses do not take the time to know and understand what it costs them to provide each service, I am not just talking about cost of product!

If the majority of business owners would educate themselves about how to operate a successful business we would see a stronger economy. Desperate businesses use desperate measures. There are other ways to get your name out there!

Good Luck to all of you, I wish you the best in your endeavors whatever you choose, choose wisely not blindly. Most owners will not understand what they have done until clients are not returning.

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Jessica Skop

FINALLY SOMEONE ELSE SEES IT LIKE ME!!!!!! (this goes for Dawn too :))

I firmly believe that deals like these will lead to even more establishments closing!! It teaches the guest to decrease the VALUE of a service. Our worth as a spa is only pennies on the dollar according to this marketing. So, as our costs to run business increase, our service price should decrease?

More and more advertising firms are focusing on “giving away” services through half off gift cards or through selling coupon books where they keep the money and we provide the service to increase “new clientele.” Well, as you stated, most clientele purchasing the gift certificates and coupon books are existing or not the clientele you want.

We had a coupon book promo that went EXTREMELY sour!! The marketing team (Cause Marketing) sold our coupon books in bars and in establishments just down the street from us. We had 2 resluts: 1. Our regular guests got over $250 worth of free services and 2. We had guests that were not spa-goes show up, refuse to tip(although that was a requirement) and cause problems while they were here.

Sorry to be on such a soap box, but I get a little passionate about my business that I worked so hard to build and companies like these actually hurt it!

Great job Chris!!

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steve

We were one of the first businesses to offer a groupon deal when they started offering them in our city some two and a half years ago. We had a good responce and gained many new customers that had never tried our type of service. I looked at it ( Groupon )as strickly an advertising expense and was happy with the result. We are now providing our service at four locations from the origional two and I find that if I start discounting the service by 50% and trying to compensate my employee because they work on a 50% of the service price comission for their paychek. I can’t expect them to perform the service for half of the 50% service rate they were already recieving. So I compensate them the some additional to make up for this difference and hope they start building a client base for each of their own locations with these new customers. Only time will tell if this type of marketing will be truely beneficial to our type of business. Currently I have to agree that it is getting completely out of controll with every Tom, Dick and Harry trying to be another Groupon or Living Social business.

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Christopher

You can’t expect them to work at half to get a potential new client, but you can as an owner?

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Ashton

I have to say that I am shocked that some people are so disappointed with 20% rate of people coming back. Um, last time I checked at our spa we spend advertising money and maybe make 1 client and with LS and Groupon we retain about 30 new clients! I am so tired of people feeling so entitled to clients just walking in their doors. If you sell 150 vouchers that is 150 new opportunities to make a great impression. If only 20% come back that is still 30 more clients you did NOT have before. As a new spa, we have really enjoyed the exposure these deals have given us as well as the word of mouth we have seen from them.
We offer each LS or Groupon client a coupon to use on their next service to ease them into paying full and it works everytime. You just have to know good marketing without being a pressure salesperson. As a small spa, we don’t have endless money to spend on ads and our techs NEED clients to stay booked and feel busy. After all a spa with no clients and bored techs WILL fail so why not give it a try?
Be more open minded and stop feeling like deals will kill, because that is the age we are in. My full paying clients are wonderful, and so are my discounted. Never make them feel like a LS or Groupon junkie because then you will never win them over.

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Christopher

Just because you’re not ‘spending’ $$ to get a Groupon client doesn’t mean you’re not ‘paying’ for them via that 75% discount.

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Ashton

You’re not understanding my point. I see value in clients not just what they pay for. But I am very passionate in my career and work hard to retain clients.

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