Every morning, emails offering deals of 40, 50 and upwards of 90 percent off the market value of various products and services are delivered to millions of in boxes across the world. From Chicago to El Paso, Toronto to Singapore, consumers everywhere are given the chance to purchase these thrifty time-ticking deals. Every day brings a new deal: Segway tours, exercise boot camps, teeth whitening, fine dining, tandem skydiving and—more frequently than not—massage.
Groupon, Living Social, Travel Zoo, BuyWithME, just to name a few, are player in the digital deal phenomenon. Salons and spas account for a good number of the deals offered through these sites—second only to restaurants and bars. According to a 2011 Rice University study conducted by Uptal M. Dholakia, associate professor of management at the Jones Graduate School of Business, " 55.5 percent of businesses reported making money, 26.6 percent lost money and 17.9 percent broke even on their promotions." The study was based on 324 businesses from 24 different cities in the United States, and is considered the most comprehensive study of its kind because the market is so new (Groupon pioneered the market in 2008) and the sites themselves share no data on how successful or unsuccessful their deals are.
As a massage therapist, you need to know the pros and cons of the digital daily deal game and consider if the risk of losing money is worth the gain of exposing your business to thousands and, depending where you live, millions of consumers in a single day.
Understand the Needs of Your Practice
Many businesses believe the exposure garnered by daily deal promotions is well worth the risk. On average close to 80 percent of deal users are new customers. However, there has been an increase of reports of businesses—such as restaurants, bars, salons and spas—reportedly losing money during such promotions. A spa owner in Dholakia's study said he lost $75,000 on the deal, while others complained about the lack of repeat customers. Daily deals can be powerful for some businesses and harmful to others. It's important to decide carefully whether or not your practice can withstand the risk of running a daily deal promotion.
Before you decide whether or not you want your services to be featured as a daily deal, you need to carefully consider the needs of your practice. What expectations do you have of the daily deal for your practice? What results are you looking for, and what happens if you don't see the results you're looking for?
"I knew right away that making money was not why I wanted to sell the deal," says Jennifer Calvo of Jennifer Calvo Massage Therapy in Bristol,CT, who was working at Massage Envy at the time to pay the rent for her studio when she decided to go out on her own. " I took the leap because I wanted to get potential clients on my table, at a great, almost impossible deal." She sold 352 LivingSocial deals for $35 for a one-hour Swedish massage—regularly priced at $75. Even though she made 25 percent ($17.50 per massage) of what she usually makes, she was excited when the deal started to sell and booked many clients the same day.
"For us, the LivingSocial deal was a one-time effort to attract a large client base to affordable, high-quality treatments by experience therapists," says Kevin Kelly, owner of Healthy Motions Massage Therapy, a small family-owned practice with three massage therapists in Washington, DC. His practice sold 1,300 LivingSocial deals for a $40 hot stone massage regularly priced at $85.
"Factors we considered included the number of clients each of us could feasibly work on per day, the expiration date of the vouchers, enforcing our cancellation/rescheduling policy, hiring additional therapists, and how much we would be making for each massage," says Kelly. Since Kelly works with his wife and another massage therapist out his studio in the finished basement of his home, they did not loose money on this deal.
"I wanted to get instant clients for the massage therapists who work for me," says Michael Moore, owner of Moore Massage in Boston, MA. Moore employs 14 massage therapists in a 1,500-square-foot facility, and has sold more than 6,000 Groupons in three deals since 2009. "It's a great way to introduce new services," says Moore, whose most recent Groupon featured $30 for a 30-minute assisted stretching session regularly priced at $55 and $60 for a 120-minute introductory acupuncture treatment session regularly priced at $120.
Calvo, who was in a car accident the day after her deal was sold, hired two massage therapists to help with the workload. Many massage therapy practices find they have to hire additional therapists during the deal redemption period. Some daily deal sites pay the revenue shares in three-month installments or in one lump sum to be paid at a disclosed time, so remember that the money you need to pay new massage therapists may not be readily available. For some massage therapists, this risk increases the detrimental costs to running a deal.
Doing the Math
Every daily deal site takes a cut of the deal. The average profit sharing policy is 50 or 70 percent of all deals sold going to the business and the other 50 or 30 percent going to the site. The daily deal sites justify these rates with the number of subscribers your business will have the potential to reach. Groupon has an estimated 83.1 million subscribers worldwide, and LivingSocial has an estimated 42 million. Many daily deal sites will not feature your deal unless you offer at least a 50 percent discount.
“I could have told them I charge $80 per massage and realized a better profit,” says Toni Creamer, owner of her solo practice, Sanctuary Massage Therapy in Gainesville, FL. Creamer sold 900 LivingSocial deals offering $30 for a one-hour massage priced at $60. Creamer and LivingSocial split the deal 50/50, and so she made $15 per massage.
But Moore thinks settling for 50 percent is a mistake, and encourages massage therapists considering offering a deal to always negotiate the terms. “Never settle for the 50 percent/50 percent,” says Moore. Named the “Best Massage in Boston” by Boston Magazine three years in a row, he credits his leverage with the daily deal site Groupon to his media coverage, and says he receives more than 70 percent of the deal. “Even if you are a new practice, you still have some leverage,” he explains. “Massage is one of the biggest sellers of daily deal coupons, second only to restaurants. Do not settle for the 50 percent and don’t be afraid to negotiate.”
The difference between a good deal and a steal is how you structure your deal and the negotiated profit sharing percentage. However, before your business is featured as a deal, you must prepare a proposal to submit to the daily deal site. As the owner of your practice, you have the ability to structure your deal any way you want. So, if you've decided to take the leap and offer a deal, it’s important you create a safety net first.
There are two kinds of deals you can sell: an item-based promotion, such as $40 for a one-hour Swedish massage (valued at $80) or a dollar-based promotion, like $40 for $80 worth of massage services. “Item daily deals bring in significantly more new customers than dollar-based promotions (85.5 percent vs. 70 percent),” according to Dholakia. Build your deal around high-profit-margin items to keep your financial costs low, as well as to protect your body from unnecessary wear and tear. For instance, you can offer an item deal such as $25 dollars for a 30-minute head and neck massage regularly priced at $55. By focusing your massage on a concentrated area of the body, you save yourself time, energy and money.
After you decide what kind of deal you are going to sell you should focus on the fine print. Who can redeem the deal? Is it strictly for new customers or can anyone purchase a deal, and if so how many? Do you want to limit how many deals can be sold? Create strict cancellation and re-booking policies that are clear and concise. Decide if you will void a daily deal after a no call/no show or offer to accept the deals after the promotion toward a regularly priced massage.
“I sold 4,409 Groupons in 2010 because I had no restrictions,” says Moore. “If you are going to do this, you must forewarn your regulars and have them book in advance.” Limiting the number of daily deals you offer and the length of the redemption period is an invaluable tool in controlling all aspects of your daily deal. Many massage therapy practices devastated by their promotions were so bombarded with daily deal clients they were left with no time to book their regular, full-paying clients. “The cash flow was stifling because we only had Groupon clients coming in, so I had to be wise about saving the money I received from the Groupon payments throughout the year,” remembers Moore.
“I can say, the hardest part is scheduling people,” says Calvo. Consider longer hours for more available time slots for customers. Also, ensure reserved appointment times for regulars. The first and last 30 days of the redemption period are the busiest days your business will ever have. “Groupon sent an email before the last month the deal was up, and by that time only about half of the 4,400 Groupons had been redeemed,” says Moore. “I was inundated with calls; everyone and their mother wanted an appointment. It was ridiculous.”
Many massage therapy practices see a complete surge in business. Creamer, whose solo practice began with five or six massages a week, multiplied to 20 massages per week. “It launched my business,” says Creamer, who used the daily deal promotion as the debut of her solo practice.
“Our online booking system was crucial in managing the extra 1,000 clients we gained through Living Social,” states Kelly. “It made it simpler for us and clients to pick and choose their appointment times.” And managing your time and practice well is key to success when offering a daily deal. “It’s really all about management. You have to manage it well,” says Moore. Whether you sell 100 deals or 1,000, you need to have a capacity plan. The easiest way to plan for capacity, control appointment times and leave appointment times open for regulars is to invest in an online scheduling system. If you do not have an online scheduling system, prepare to play lots of phone tag.
1,000 Deals Sold! Now What?!
It’s important to understand the type of consumers your business is attracting when using a daily deal promotion. “Daily deals draw in consumers to the business for the wrong reason,” Dholakia suggests. “Not because the business sells something the consumer truly wants or is interested in, but because the business is selling it at a very low price.” Considering this fact, it’s important to have a supplemental marketing plan to create repeat business out of deal-crazed consumers.
“If anything, it reduced our marketing expenses, since we did not feel we needed extra clients during the promotion,” says Kelly. Most massage therapy practices think the daily deal is their only means of marketing, but it’s important for you to not only try to attract extra clients during these times—but also repeat business.
“Many massage therapy practices have the customer come in for the massage and leave without any mention of other services or specials,” says Dholakia. He advises business owners must make the effort to really sell their business and build their brand. Perhaps hand out referral cards for $10 off their next regularly priced massage for the card holder and the card giver. Have other specials going on that can easily be tacked onto a session. By creating more opportunities to sell your business, you will see a greater profit and chance for repeat customers.
“We've expanded our email newsletter circulation by about 1,000 people, and we have become more successful with our own specials and discounts that we offer a few times per year,” says Kelly. Be sure to add daily deal clients contact information into your client database, and stay in contact.
Deal users are well-known for staying within the spending limits of any given deal. According to Dholakia’s study, 35.9 percent of deal users spent beyond the deal value and only 19.9 percent returned for a full priced purchase. “Some massage therapists may have a bad attitude when they have a lot of Groupon clients coming in, but the whole idea of the Groupon is to retain clients,” says Moore. Moore frequently offers 20 percent off a client’s next massage if they book in advance, and adds a personal touch by sending out thank you cards. “It’s important you keep a positive attitude.”
Deal or Steal?
Most of the businesses we spoke to reported less than five percent of daily deal users have returned for a full priced massage. After taking such a big risk to run the deal, this is not the kind of return many businesses hope for. “By their very nature, daily deal promotions appear to be limited in their abilities to: (1) attract free spending consumers, and (2) to convert deal-users into repeat buyers with the propensity to be relational with, and loyal to the business afterwards,” says Dholakia.
The 19.9 percent of deal users returning to buy a full price massage spent an average of $70.80 on their next visit. Since deal users are less likely to return and pay full price, you may be wise to offer your own discounts during the year. “While I would be reluctant to offer such a deep discount as the LivingSocial deal,” says Kelly, “I believe our regular rates attract many LivingSocial clients, and we are able to attract more clients with our own discounts.” For example, Kelly offers $10 off a client’s first treatment, package discounts and special discounts on gift certificates three times a year.
If you do decide to participate with a daily deal site, your best bet is to shop around. The daily deal sites have not done much to separate themselves from each other, so find the one that gives you the best deal. Do not settle for selling your business for cheap. Find the site that allows you to feature your best deal at a revenue sharing percentage that benefits you.
When structuring your deal, according to Dholakia, offering deals with higher face value and a shallow discount (such as 25 percent off) increases the possibility of having a profitable promotion. The Rice University study also found that the percent off the regular price did not impact deal profitability significantly, raising questions about the practice of offering deep discounts in such promotions. Placing a limit on the numbers of vouchers sold and a reasonable redemption period also contributes to a profitable promotion, according to Dholakia. “Businesses with a low cost structure can make money off these deals. But if the overhead is high, then they stand to lose a lot of money,” he adds.
Only you can know for sure if participating in a daily deal is right for your business. Dholakia speculates daily deal sites will cease to exist in the next few years because of their high profit sharing revenues and high risk for participants. Despite this fact, however, more daily deal sites seem to be sprouting up everywhere. Websites like Google, Amazon and Facebook have already begun testing the digital daily deal waters.
“Some people don’t like Groupon and call it ‘Poopon’ because they don’t like the idea of selling discounted massage,” says Moore, “But it’s survival of the fittest out there. The world economy is terrible, money is tight, and some massage therapists have to go back to a nine-to-five job because it’s not easy out there. I’d rather sell some discounted massages than not work at all. I love what I do. I’m busy. Are you busy?"
All massage therapy practices see a complete surge in business, and many do not have the administrative power to handle the surge in calls during the daily deal redemption period. “We would get 50 to 70 calls a day,” says Michael Moore, owner of Moore Massage in Boston, MA, who has sold more than 6,000 Groupons in the past three years. “Having an online booking system is a big deal. You have to have it.” Instead of finding yourself behind the desk all day playing phone tag, invest in an online booking system that turns the hassle of scheduling into an easy and convenient process for you and your clients.
“Our online booking system was crucial in managing the extra 1,000 clients we gained through LivingSocial," explains Kevin Kelly, owner of Healthy Motions Massage Therapy, a small family-owned practice with three massage therapists in Washington, DC. “It made it simpler for us and clients to pick and choose their appointment times.”
Many online scheduling services allow 24/7 booking, precision time slots in as little as 15 minute increments, the ability to book repeat appointments as far as a year in advance and instant confirmation to all booked clients. Help prevent no call/no shows with appointment reminders via email and text. Turn convenience into loyalty by allowing your clients to choose the best time for their massage.
Many online scheduling systems are flexible and customizable for your practice. Here are some of the top rated scheduling systems:
- “Coupon Wielding Hordes” feature that allows customers to schedule online via a link on your daily deal page or the Genbook BookNow button on your website.
- Customer database captures all relevant contact information and appointment details.
- Automatically collects customers’ reviews and posts them on your website, search engines or in the schedule itself.
- AMTA members receive 15 percent discount.
- Price: $16.95 ( sole proprietor) per month to $33.95 (multiple users)
- Customer appointment history and notes.
- Customer payments.
- Advanced features include: advanced analytics and reporting, scheduling templates and service packages for purchase.
- Price: $39, $49, or $79 per month
- “Deals Manager” feature helps identify the maximum number of appointments that can be generated over the lifespan of a given daily offer.
- Available for use on any smart phone, website/blog, Facebook and Twitter.
- Custom email templates to build the professional look of your business and brand for use with newsletters and special promotions.
- Price: $39.99 per month
- Synchronize with calendars: Google calendar, MS-Outlook, Apple i-Cal, Mozilla or any program that supports the iCalendar standard.
- Define a recurring agenda. For example: I work Tuesday and Thursday 9 a.m. to 2 p.m.
- Post availability.
- Widget for website or create a Scheduly business page
- Price: Free first 90 days then $9.95 per month