After evaluating the Groupon model we decided it was not a good fit for Preston Wynne Spa. I’ll explain exactly why, as I think it may be helpful for you to hear as you approach other companies in the spa and salon industry.
Spas need to be much more strategic about the number and type of clients we seek, and deep discounting is a crude tool at best. We have very high cost of sales because most of us pay our workforce when a service is done (either through a fee for service or by commission). This is not a model where you can add customers and and automatically increase profit, where modest incremental profit x volume = success, as in a movie theatre or bowling alley or whalewatching boat. Even a restaurant has indirect labor costs.
To us, there is no point filling our most popular and profitable times with Groupon customers, and Groupon did not, at the time, enable us to limit redemption periods to weekdays. (In fact, I got some attitude from Ms. XXXX, i.e. who said scornfully, “we’re not just here to sell your Tuesday morning at 9 a.m.”)
I will say that she produced one spa reference who *was* pleased with her Groupon promotion, but I don’t know the spa’s age or location, both factors that make a world of difference these days.
We are actually experimenting with an offer with one of your competitors, one that enabled us to control much more of the factors involved and targeted our prime demographic, not the Free World.
I am deeply, profoundly unconvinced that Groupon customers consist mainly of potentially solid, loyal potential clients. Discounting has not been shown to create loyalty in past studies done on this marketing modality. Discounting creates a relationship in which there is an expectation of further discounting. Discounting is a depressing, stunningly un-creative and ultimately zero-sum game. (There is always, as I tell my consulting clients, someone who is dumber or more desperate than you.) The participants in Spa Week, another periodic discount promotion, who have come to our spa were uniformly high maintenance and low performance. And they were self selected spa fans.
To me, Groupon and its host of imitators are simply feasting on the carcass of recession-battered, desperate small businesses. And if that is the recipe for the fastest growing company in history, God help us all.
*That’s* why we don’t want to play.
Jane, that’s probably more than you wanted to know, 😉 and I encourage you to pass my comments on to your management team.
Peggy Wynne Borgman