No Coupon Love?

A few days ago I posted a link to an article about using coupons from companies like Groupon and Living Social, most importantly the article talks about how to get ready for the possible deluge and some warnings. I also posted this link on the listserve for the Washington DC chapter of the American Massage Therapy Association (I'm a member).

I didn't realize how many local MTs had already experimented with these coupons. Here's a sampling of their responses and experiences:

I worked for [a yoga studio] last fall. I was hired at end of summer to help with the Groupons. They sold them for 50.00, I got 20.00 per coupon plus tips. It almost ended this lady's business. She did not have enough therapists to cover all the calls, they overbooked, and everyone was stressed out. Then the customers started complaining about not getting sessions. She chose to honor the coupon holders for 3 months past the deadline if they called before it expired. Everyone calls the last week before the coupon expires...looking for an appointment.

On the other hand here is a good example: Other massage therapy places like [a local spa] were smart.She had a groupon for 45.00 which gave you 30 min massage, plus a free product (body scrub), and a 30 dollar discount towards the next massage! Very smart. Separate Groupon booking online and I could tell the  staff were not getting abused by the Groupon Coupon. That looks like one way to make the groupon work out.

I also got a response from a former chapter member who's now working in South Carolina. He makes an excellent point about "converting" coupon users to regular users:

 

I ran two Groupons here in Charleston, and know several Spa/Salon/Massage/Facial/Nails business owners who have done the same.  To a person, they all say it's a losing proposition.

1- You're required to discount the service by 50%, and then only get 50% of that (Groupon keeps the other half).  Once you account for overhead, product costs, etc. you are making close to nothing, if not nothing.

2- Though it does give you "exposure," the conversion rate to regular clients is very low.  In some cases it's as low as 5%.   The problem is that the proliferation of online deals (in Charleston there's Groupon, LivingSocial, DealMobs, and Savvy Shopper), means that there is a massage deal available every week (sometimes 2/wk).  Consumers have been trained to expect to NEVER pay full price for a service, and most hop from one deal to the next.  I know most therapists think that they are good enough to keep those clients, but it just doesn't happen.  I've had people sincerely say I gave them the best massage of their life & promise to come back, yet they don't.  In this economy, why should they when there's a $30 massage offered the following week?  Other business owners complain of exactly the same problem. 

3- The only way I would ever do it again is if I could come up with such an expensive service (a luxury massage with lots of add-on's) that I would still make a reasonable profit with my 25% cut. 

4- For all of the above reasons, I'm predicting that these companies won't be around in 3 years.  Businesses have caught on, and aren't participating as much, if at all. 

An example of a place that made some classic mistakes:

Back in the summer I responded to an email from a local health club looking to hire MTs. 

The club was small but had advertised with Groupon and sold 1700 massages at $40 per massage. They needed to increase their massage staff (they had 3) to handle all the groupons.  When I inquired about what they pay the answer was:

For any non-coupon you keep 100% (they charge $90 per massage). This is supposed to make up for any groupon/coupon they only pay  $16  per massage to the therapist - oh and you get to keep whatever "tip" the client gives. 

Now -  how many full price non-coupon sessions do you think you would get compared to the groupon sessions? I was not interested.

In many ways, these experiences validate the article's initial advice about getting ready for coupons. However, I think we have to think carefully about why we want to offer a coupon. In my years of experience, once someone puts massage in that part of their brain reserved for "free / crazy cheap" it's almost impossible to get them to move massage to the part of their brain reserved for "things I pay full price for".

In my experience, you can offer discounts as long as they are modest. For example, a $10 discount for the first appointment has worked quite well at places I've worked. The client gets a small "reward" for trying a place but doesn't find paying the extra $10 the next time a huge hurdle.

Keep the incentives small but attractive and you're less likely to get into trouble.