Our Client: We want to do a Groupon!

Spas, restaurants, art, cupcakes, skydiving, wine tasting, Mexico getaway – not a day goes by that most of us don’t view some sort of “Daily Deal”. Whether you are a Groupon or Living Social fanatic, I’m sure you have been exposed to the daily deal frenzy in one way or another. Many small businesses are drooling over the idea of getting hundreds of customers in the door by offering a significant discount for a day, with no up-front costs.

A local plastic surgery practice came to us desperately wanting to participate in this glorified marketing strategy they have been hearing everyone talk about. With no up-front costs, spectacular discounts for the customer and increased traffic for business, isn’t this a tremendous win-win? What’s not to like?

Here’s what we had to say —

Groupon, the biggest player in the daily deals arena, has been catching some negative feedback lately, especially from small business owners. One small business owner called Groupon, “The single worst decision I have made as a business owner.” She also wrote a blog on her business page to share her lessons learned and apologize to one of her very loyal customers. Is Groupon the right approach when it comes to small businesses?

We sat down with our client to see what we should do—

Problem:

They’re an hour away from both Baltimore and Washington D.C., and their community doesn’t yet offer a Groupon or Living Social – based on past experience, we may have difficulty even getting these companies to give us a shot at a deal. There just may not be enough people in their community signed up to receive daily deals.

But wait – while investigating our options, we found that their local newspaper had started a daily deals program, and the client thought this was an ideal solution. So we started to run the numbers:

Here’s how it would work:

  • Normal Cost: $350
  • Offered discount price: $175
  • Local “Deals” company keeps: $87.50
  • Product Hard Cost: $70
  • What’s left: $17.50

Overall, the practice would “profit” just $17.50 just with no other costs accounted for – doctor and staff salaries, office space, taxes, energy bills – this deal was starting to look less and less like a home run.

Some of our bigger concerns…Are We:

  1. Lowering the price in marketplace (Will consumers expect to see this price year-round? Will they wait, expecting another daily deal?
  2. Attracting the wrong customers (Those only interested in free, or really, really cheap?)
  3. Sending the wrong message (What about those customers that bought at full price, your loyal customers? Will they feel ripped off?)

So we said No. 

In the end, the numbers just didn’t add up. The potential long-term damage to the business, and to their pricing, outweighed the possible gains we might see from new customers responding to a “daily deals” offering. But we still needed a solution – how could we capitalize on a market that’s used to seeing these types of deals, but in a way that made sense for the business?

Here’s what we did:

We developed a 6-month customer loyalty/deals campaign focused on marketing to current customers and attracting new customers through email marketing, social media, Youtube ads, and a small, targeted tv campaign. And we did it without a huge budget. With this strategy in place, we’ll be able to:

  1. Offer (and promote) deals for two weeks instead of one day.
  2. Control all of the messaging and timing surrounding the offer.
  3. Offer great discounts (30-50%) without having to split the revenue with a deals company
  4. Educate the market about ALL of the products and services over the next 6 months, instead of just offering 24 hours to make a decision about one offering.
  5. Ultimately be able to track the effectiveness of each ad outlet in order to trim ad costs while increasing response.

Better strategy or not? We think it is. Yes, we chose not to take advantage of Groupon or Living Social this go around, but has it worked for any of our other local small businesses?  The answer to this – heck yes!  Look for part two of this blog coming soon to see how.