Daily deal sites are all the rage for consumers – but are they a good fit for your business?
Before you sign up to offer deep discounts on your services in order to woo new customers, you need to consider the facts. Sites like Groupon, Bloomspot and Living Social may not bring you the benefits that you’re looking for – unless you have the right strategy in place to woo couponers and turn them into long term clients.
Do Daily Deals Add Up?
Daily deal sites seem promising to many spa owners. After all, who doesn’t want a flurry of customers coming in all at once? However, after the initial rush of bringing in dozens, or hundreds of customers, there are the financial facts to deal with. Most sites will encourage you to give 50% off of your retail price for services, and will charge a fee of 25% of the total retail cost of your service. When these are combined, these discounts may eat up your profit margin.
For example, if you have a basic spa package for $80 retail, it may cost you $40 in labor, products and other miscellaneous business expenses. Your total profit off of this service is $40. So it may seem like you’re breaking even on all the daily deal coupons coming in with a $40 price tag. The only problem is that when you add in the daily deal site’s commission, it leaves you with $20 of loss for every sale.
That may not be a bad deal, IF you look at that as money spent on marketing and advertising to attract a great new client. Which means you need to be clear about who you’re targeting with your deal.
What Kind of Customers Can You Expect?
According to the research firm User Insight, there are two types of coupon seekers that you can expect to find with daily deal sites. With the right strategy, you can easily turn couponers into long term customers.
This type of couponer doesn’t actively seek out deals but will pick one up if she runs across it and was planning to buy that service or product anyway. This type of couponer may have considered visiting a spa, or treating herself to a massage, and seeing the deal on the website coincided with her need.
Groupon and other daily deal sites might be a good way to introduce your spa to this customer – but you need to really “Wow!” her with service in order to get her to come back and give her an incentive to do so. If her experience is truly exceptional, you can count on her returning.
Unlike casual couponers, who may have bought from you anyway, reward seekers are buyers who are always on the hunt for a low price. This type of buyer isn’t loyal to your brand – she’s just looking for a deal. She’s going to move onto the next deal unless you have an enticing loyalty program to keep her around. If you’re willing to create a frequent customer program or have another type of ongoing discount in mind, you can grab those daily deal seekers long term.
Participating in a daily deal isn’t necessarily a bad idea. It can be a great boost to your business! But you do need to understand clearly what you’re signing up for and how the numbers work.
For this opportunity to really work for you, you need to have a strategy in place to turn each of your daily deal sales into a recurring client, so you can re-coup the cost of services up front and build up a consistent revenue stream with that client. Also, you want to have systems in place that will “wow” your new clients and incentivize them to return soon after their first appointment.
Before you sign up for a daily deal website, you need to look at the situation from all angles. You have to determine whether or not it will be a good deal for YOU as well as the customers. Crunch the numbers and figure out how much you can spend to obtain a new customer.
If it looks like a good fit for your business financially, understand the difference between the most common daily deal customers – and get those systems in place to keep your new clients coming back. Only then will you be able to reap the benefits of inviting couponers to your business. Good luck!