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The Problem With A Cheap Pedicure

So there I was, minding my own business (which means creepily reading everyone else’s business on Twitter/Facebook/Google+/Friendster?) and I ran across my main man Chris from Kitestring posting a link to a daily deal for a salon in town:

It’s a steal right!?!?

Yep, and it can steal their business right out the door into bankruptcy.

You get 30 services for $149 (10 of each mani, pedi, massage). That’s $5 per service. But the vendor usually gets half that, so $2.50. They’ve sold 157 so far. So for their net of just over $11k, they’ve committed to 4710 service renderings. 13 things a day. Every day, for 365 days. Even if only half are redeemed, that’s $5 per session.

One of the points of doing a daily deal is to get people into the door to try your service so they’ll come back and pay full price. But when you give ten of each service? And you can buy two sets for yourself? I’m thinking 20 pedicures can last this guy about five years. Not that I’ve ever had a pedicure done. Ok, once. Shut-up.

Not only is the quantity an issue, but many businesses have learned that “some” of the people that buy (aka almost all) these group coupons aren’t loyal customers, they just move on to the next salon in town that runs a deal. Also the same people who won’t usually tip heftily on the deeply discounted service.

Can these promotions work? Sure. And if you’ve used one for your business, please post in the comments below, I’d love to see some success stories to give it balance and your thoughts on why it worked (limited supply/timeframe, scalable service/product). My wickedtastic place where I get my tattoos (WayCool) just ran a Groupon and so far it’s working out, but that takes a little more commitment than a pedicure :)

But there are way too many cupcake promotion from hell stories to let this slide.

Some ask “Why didn’t the business see this coming???” or say “The group site sales rep forced them!!” and I think it’s the case of both high-pressured sales and business being ignorant to the potential. This isn’t new because of the online explosion of sites either. There was the famous Hoover Free Flights fiasco in 1992 that went to court and cost them over $50 million. (thanks OnlineMom for the link). We even have a couple of doozy stories coming out in the new book (September 2012) that felt the wrath of the Mom-a-lanche.

What do you think about it all? Have you bought a deal before? Were you happy? Have you run one as a business? Have you worked for a group-coupon company? Tell us below!!

Oh, and for those that like to read things, the UnMarketing paperback is hitting the shelves. Woo! No group deal…unless I artificially inflated the price……… UNPAPERBACK IS 99999% OFF THE $1,000,000 COVER PRICE!! ACT NOW! SUPPLIES ARE NOT LIMITED! WILEY WILL PRINT MORE!

  • Cantina

    Believe me…I have been called in to clean up the aftermath of a Groupon deal gone bad on a few occasions.  There seems to be more horror stories than successes when it comes to Groupon-daily deal offers.  There are many ways that biz owners can run their own custom deal campaigns that allow them to be in “control” of what the deal is.  This can be done through text message marketing to their existing client base.  Give them a reason to opt in and pass the savings on to their friends.Whether it be a free dessert with the purchase of….. or $1.00 off your coffee with the purchase of a…….  You don’t have to give 50% off or give away your first born to bring people through the doors…just be able to use some creativity to turn customers into raving fans. People who opt in are people who “want” to be on your list…they want to get the deals you offer and this helps build your own “loyal” tribe. 

    ENGAGEMENT! ENGAGEMENT! ENGAGEMENT! I can’t stress it enough…

    Reward your existing customers as well for bringing in new customers.  Create a referral program. build your loyalty campaign…just by reaching out and adding a personal touch to your business, trust me…it will go a long way…

    I could write all day about this but just wanted to give my 2 cents.

    • nodealsplease…

      My thoughts exactly.  I’ve built my small business successfully on these practices.  Foursquare is an awesome opportunity to  offer incentives to get new customers in your door and merchants have full control over the deal.   Yelp has a deal offer also.   I am in the personal services business, and my best advertising is word of mouth.  My clients are looking for quality, and they know quality comes at a price.  I’ve been approached by daily deal sites to run them but I’ve done my research and know this is not a good fit for my business.  

  • Nadine

    I think businesses get into offering these deals for the same reason we buy them…money!  But in the end the loyal customer, not the spend thrift will be there most reliable source of income.  If a business is going to do it, the best way is to add tons of value and an unbeatable follow up.  Free chocolate or flowers never hurt for the girls!

  • http://twitter.com/arobidoux Amber Robidoux

    As a new massage therapist, I ran a deal to bring in some new clients. At the end of the day, I was getting $12/session. The company was nice BUT I had to stay on top of them to get paid. They paid up immediately but never without a prompt from me first. 

    The other thing I experienced was a massage therapist in town (right down the street in fact) purchased TWO of my deals, showed up late to the first appointment and was a no show for the second. At first I thought it was nice of him to send me “business” but then I realized, no, he’s ripping me off. This was intended for new clients. 

    I haven’t run one since and not sure I will again. 

    • nodealsplease…

      Amber he was most likely spying on the competition. 

  • http://twitter.com/MonicaRicci Monica Ricci

    I have to be honest and say I have a hard time feeling sympathy for a business who does this. Math has never been my strong suit, but jeez it doesn’t take a math whiz to look at the numbers and realize that by offering this kind of deal you’re SCREWING YOURSELF right out of business. Ugh. Not to mention the poor schmucks who BUY the deal and will be out $139 when they show up for their services to find plywood over the windows.

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  • Tina Holmes

    Hot topic in our marketing world!  my 2.5 cents it really boils down to depends on business, product, knowledge (smarts!!).  I produce Event (Home Show) in Toronto and we use Groupon to drive traffic and offer a one time (limited/capped) deal to get them to come and experience the event.  The good thing is this event is once a year – can’t buy sessions.  Groupon in particular provides us with another potential new avenue for new audience and the younger generation.  The problem we have now is there are so many deal sites out there that it has lost the “BUZZ”.  People are now deleting the emails and it’s not as impromptu and cool as it used to be.  Has Groupon aged itself already!  We have used WagJag and Groupon and this is the year we can try to measure it.  The reason I say try is that with social media – the word gets around so fast with the deal from additional sources directing them to Groupon – did we really need to pay the commission as we could be driving same message ourselves.  Work-in progress!!!

  • Ulli

    Hi there. I live right now in Germany and I do not know if ou are aware of the cheap-cheaphype we went through a couple of years ago (and which has not quite disappeared) – the motto was (pardon my “French”: ‘Geiz ist geil’ (greediness is wicked / cool / horny (all that is comprised in that term). This far from thinking just economical, that was THE door opener for cheap (in quality and social responsibility, too) products / services. I guess all the Grouponing etc. fits into this part of the market or better for the respective target groups.

  • http://www.skriftlig.no Christian K. Nordtømme

    Can’t tell whether the percentage was an intentional part of the joke or just tripping over the numbers (it borders on the unfunny that you’re paying people $998.990.000 each to buy the UnPaperback), but it reminds me:

    Just like I’m sure there’s a place in hell for the seller who let that group deal go through, there must be a special circle of hell for marketers and advertisers who exploit people who just don’t get percentages. It’s scary how often otherwise smart people interpret “Our competitor charges 50% more” as “Half price!”. And I think you have to be at least 50% evil to systematically prey on people who are bad at math.

  • http://www.allproactive.com/ Patrick

    I had a client who I suggested NOT do this, but did anyway (they wanted people in the door) and now they are paying the price (literally). It costs them more to provide the service and the type of client they’re looking to up-sell are not those who buy discount coupons. Lose-lose on this one. 

    Although, the company selling the coupon service is making money. So, maybe that’s a lose-lose-win?

  • http://www.randygage.com/ Randy Gage

    The only free cheese is in the mousetrap.
    -RG

  • http://www.facebook.com/jonas.deffes Jonas Deffes

    This is for People who Brag about how much they make with Groupon Promotions

    Groupon is like that “easy” hot girl who sleeps with everyone..yeah
    she’s hot..she feels good… but when it comes down to it..it aint
    nothing to brag about because everyone had their turn.

    Jonas Honey Badger Deffes

    • nodealsplease…

      I need to steal this :) 

  • http://twitter.com/Jane_Hendry Jane Hendry

    I’ve found many deals to be based on over-inflated base prices.  I bought a watch that was supposed to be worth £12, but they were selling it for £6 + £3.95 p&p.  Turns out you can get those kinds of watches on Ebay for £2.50 including postage!!  Ditto a cleaning company selling 2 hours of cleaning for £29 which was supposed to be 70% off.  Hmm, that makes the normal hourly rate £14.50/0.3= £48.33!!!  Most domestic cleaning is charged between £8.50 and £14 per hour!!

    We did a restaurant deal – that was good value. Not sure if we’ll return though.  We reckoned they would have made a small profit or at least broken even on that one.

    Whilst I realise that there is the argument that you don’t generate loyal new customers with Groupon etc., there is the argument of raising awareness for people who don’t buy the coupon.  For example, I didn’t know there was a chain of Brazilian restaurants in London that specialise in rodizio bbq – which I love.  I have it on my to do list to go the next time we fancy a night out in London – and we won’t wait for a deal.  We have really struggled to find any conveniently located Brazilian restaurants and now there’s so many that I never found on Google!

    I guess there must be an art to structuring the deal so that it generates sufficient interest, so that the coupon company are happy, and you don’t put yourself out of business.  A photographer friend of mine has considered using Groupon but he’s looked at other people’s silly deals and been totally scared off the idea.  Because, he bothered to do the maths and work out how many hours he’d have to work if he sold 1200 discounted deals.  To a degree, it depends on what you can sell on the backend or upsell to new, loyal customers.  It doesn’t make sense to sell a cheap “get them in the door” deal, if you can’t monetise down the line.

    I’ve been wondering if I could use Groupon to sell some kind of marketing strategy session.  I’ve noticed that we’ve started getting some offers from accountants, so why not other professionals?  So long as I didn’t have to sell 100 of them, it could work really well – free marketing and I get prospects through the door.  One advantage would be that they had to pay something to get the session, thus demonstrating some level of commitment to the process.  But would Groupon make me try to sell hundreds, that I could never fulfill?

    Thoughts?

  • http://twitter.com/itfactorymedia It Factory Media

    I agree with the “Positioning” (I would think most people interested in “UNmarketing” are familiar with this classic) argument that offering coupons gives the hidden message that one’s prices are too high, and that they’re somehow gouging their customers who pay full price. It teaches people to shop only when something’s on sale.
    That said, one of my clients, whose main issue when we began working together was that he wanted to get away from coupons, insisted on doing a deal with Groupon. He was happy with the number that sold, but unhappy with the customer retention on the deal (so far). Their main issue with Groupon, which Groupon corrected only when we threatened to use Living Social instead, was that they were pushing the wrong services that they made the least amount of profit on. Groupon will negotiate on pretty much anything if you let them know you’re willing to walk away. And that’s the other thing I hate about coupons — it’s similar (in my opinion) to haggling garage-sale-style. I like saving money as much as anyone, but I feel as though it’s all some weird psychological game designed to generate a dopamine response for something that should never have been priced that high to begin with. 

    • http://www.untitledminimalism.com/ Robert Wall

      Pricing is complicated, but I think it’s possible to run coupons and still not devalue your product or service. 

      From what I’ve seen (as a seller and a customer), the key seems to be that you make your coupons/deals rare, or driven by a business reason.

      On the “rare” angle, you could run a Groupon once a year and probably not be devaluing your service. On the “business reason” side, a heating and air conditioning contractor could run a special on air conditioner maintenance in February because business is structurally dead that month.

      It’s these places that send you coupons every week and practically beg you to buy that destroy their price credibility.

  • http://www.evotivemarketing.com/ Aileen | Evotive

    Looking forward to your book coming out in Sept. with more stories of the group buying deals. It’s tricky marketing tactic, I’ve seen it work well and I’ve seen it cost a business a lot of money. It’s important to be clear on what to expect from it & use a group buying site that will allow you to set a limit on how many can purchase the deal so you don’t end up like the cupcake story!!  Yes it can bring a boost in traffic, but even if you capture their email address and info, they still may not come back. It’s a gamble and a business may choose to experiment with it, but to do so wisely is recommended. 

  • Jay

    First of all the horrid Groupon copy is designed to attract the cherry pickers and does.
       Secondly, we know restauranters who say every time the phone rings it’s another deal hunter and it’s irritating.
       Thirdly, this stuff is peaking and will change to favor the businesses. So, if Groupon wanted to do a deal with me I would do it only if I could state the offer above my name, with a photo of myself for believeability, saying in quotes: “Look we know you want value and you know we want new customers. Let’s play square with each other. You come to my salon (or restaurant, etc.) three times and the fourth haircut (dinner, etc.) is on me, with my compliments and gratitude.” 
        So they’ll like me or leave me. May have to tweak the offer a bit but I thing this would separate the cherry pickers from the straightshooters and drive real new business.
    Jay  http://www.quantmethod.com

  • Kristina

    And just maybe they have no intention of being in business 3 months from now. Because it is so cheap it wouldn’t surprise me at all.If I were one of the 157 to own this great groupon coupon, I would get some massage time in real quick since that is a higher ticket. They didn’t even leave room to up-sell customers.

  • Casadiamorelv

    Scott, as a restaurant that gets called on every day for group coupon sales, our response is a pat “No thank you. We don’t have enough seats for full fare guests”.

    • http://www.twitter.com/unmarketing unmarketing

      Love it!

  • perspectiveofaprlady

    When I first read this deal I thought that it was a made up one. But it is for real, and when you break it down it just doesn’t make sense. I have never used Groupon or anything like that before but I am sure there are only some cases that it would work. If there was a deal that could get someone coming back for more it would be better. Something like buy one service the net one half off? At least the customer would be walking through the door twice, maybe by then you can keep them as a loyal customer? Not sure if this would work or not?

  • http://twitter.com/pamelamaeross Pam Ross

    Scott, great post. I was in the midst of typing one very similar when my sister sent me this link. I have been sucked into the vortex of the promise of a great pedicure at a “too-good-to-be-true” price and have certainly learned that if it seems to good to be true, it usually is. Shoddy service, terrible follow up, and companies that don’t actually deliver on their promises seem to abound in these sites. Thanks for posting this… I will finish my post about my experience and would love your feedback when it’s posted! 

  • Aerinfirehair

    I recently ran a Daily Deal, which is through entertainment. I am happy to say, with 217 coupons sold at a 67% discount ($20 for a one hour massage), and about 45 redeemed, I have secured several regular clientele. I will say that I’m aware my work is exceptional quality (by customer comments), and my deal ran on thanksgiving day. I’m sure this drove sales and increased retention since many were gifts. I’m a solo therapist and have only provided service based on my availability. I plan to run again, with a few tweaks!

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  • Boop_oopy_doop

    Circumstancial, i work in a salon where new clientelle are always welcome…we ran a group discount that was only good for a few of us who were currently seeking new clientelle. Most clients who come in are ones who wont return, but if you play it right..they might. If u do a good job they’ll tip, refer, and come back. Its not fun to perform discounted services but it beats sitting around wishi g u had a client in your chair

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  • Merel Barnard

    I think they hope you pay for 30 services, forget about it and don’t use them all. 

  • http://www.freedomtarget.com/ Kevin McKillop

    This deal market will eventually consolidate as the smallers one go out of business as the ‘boom’ disappears.   The other thing that needs to happen is there needs to be balanace in the customer/business power scale.  Right now all the power belongs to the customer and that can’t sustain itself. 

  • http://twitter.com/EvanVanDerwerke Evan VanDerwerker

    Awesome post, and I agree 99%:  After a quick Google search, I learned that “La Petite Spa” is a spa for kids. I could be wrong? I don’t know much about spa-ing (spa-ing? spa-ffering?), but I’d say a kid spa isn’t as difficult or as costly as an adult spa. And, that applies to the services/supplies as well.

    While the deal isn’t necessarily a safe bet and is unnecessarily grand, I’d put a good amount of money on the idea that “with kids comes parents with wallets.” (Assuming the parents are allowed to partake?) Even if parents aren’t allowed to participate in the spa-ing, I’d say they wouldn’t be too inclined to watch their children get “the spa treatment” for 20 hours in any small amount of time.Tack that on to the very real fact that not all children are enthused to sit still for more than 15 minutes, and it’s shaping up a bit better.Ultimately, I don’t recommend the bargain, but I also wouldn’t think that this business will quickly tank (or even at all). This promotion is intended to generate a solid amount of money now, without losing too much too fast.

    The spa attracts its customers with a shiny promotion-sized toy. Like all shiny toys, kids will lose interest before they get their money’s worth.

  • StaceyEmersic

    We’ve gotten calls at the store from US companies with Canadian branches where the sales guy was aggressive and told me what he was going to do for us. When I asked specifically what that would be, out outlined a deal he was going to offer to new customer where they would make 50% off of. I hung up after a polite, “No thank you.”

    So, for anyone who claims they were bullied into a horrific coupon deal, this is for you: It IS possible for you to say NO. Just say it. Thank the person for the offer and then hang up. You don’t want anyone who will offer you horrific “deals.”

  • http://www.angelamaycompany.com/ Angela May

    As a spa owner who made this mistake once, and nothing near as ridiculous as your example above, these deals bring in the WORST customers who leave you for the next deal as fast as they come in. And about 80% do get redeemed contrary to what the deal sales reps say (50% and under) In addition to that, your regulars get upset because now theres no room in your appt book for gracious, full paying customers. So its a LOSE, LOSE, LOSE! :-)

    Now, there is a way to make this work in your favour. Step one – don’t be foolish like the company featured above. If you’re doing a deal on a pedicure – the deal should be for a basic pedicure, not including polish. The trick is not to give away the farm in a deal. Hair stylists- do deal for a cut – blowdry style upgrade when the client comes in to the salon. Fitness pros – Never do a deal for more than 2 classes, or you will never be able to sign them up for a membership to your gym or services.

    So that’s my two cents – from EXPERIENCE, not opinion. Hope it helps some business owners out there. I do believe deal companies and vendors CAN get along, but only if the vendors are smart about what kind of deals they approve.

    • http://www.twitter.com/unmarketing unmarketing

      Thanks for the practical feedback Angela. Nice to hear more from the trenches!

  • http://www.devinx.com/ Devinx

    groupon and the alike are really ruining businesses. I see SOO many of them closing doors after an abuse such as this one. Yes people will be jumping on the deals…and will keep that business working for NO profit, not even covering labour..for at least 3 – 6 month …sometimes more  in the case of the above example…so the owner will suffer BIG time when NONE of the coupons peeps show up to pay the 50$ or whatever it should have cost.

    shame on groupon for stuff like this.

  • http://twitter.com/alderaphobia Dazzler

    I was an esthetician (mani pedi provider) before I changed careers. A salon offering these deals is cutting corners to make these prices happen – either in paying their staff, or in their cleanliness. A deal like this can work great to build business – but not by offering 10 services. We were effective when we offered one or two to get them interested and then they would come it without the deal.

  • http://twitter.com/alderaphobia Dazzler

    Also – whenever I see these Deal offers, I usually call the business directly and say “Hey, I saw you have 10 yoga classes for $10.” Can I book that same deal through you directly.

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  • https://twitter.com/MariaAnemone Maria Anemone

    I wonder if there was some kind of crazy fine print in this deal. Anyway, its true, giving away that many services in one deal wouldn’t result in a repeat customer… they’d have to spend 10 sessions providing awesome service, for the CHANCE that the customer would choose to come back after that (instead of looking for the next steal).