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A little over a year ago, a company called Groupon contacted me.
“Have you heard of LivingSocial?” the salesperson asked.
I had, but I wasn’t very familiar with the company, and I had never purchased a “deal” before. He explained to me that Groupon was a website that offered a daily deal ranging in 50-90% off regular price. Deals were categorized by city, and emails went out daily to everyone who signed up.
He explained that Groupon was no risk, as it didn’t require any money up front from the business. As a struggling new business owner, this part sounded too good to be true. Groupon offered a 50/50 split on all proceeds, to be divided up in three payments after our deal had ended. All we needed to do was decide what the deal would be and then sit back and wait for all the new clients to pour in.
I decided my deal would be $50 worth of services for only $25. I gave approval of the copy and fine print, and we were ready to go. We sold an astonishing 92 Groupons, with 77 redeemed. The remaining Groupons were never redeemed, but no matter — we still received our share of the money.
Of the 77 clients we saw, seven became regular clients, bringing with them family members and friends — stretching the number to much more. So even though the majority of the clients we saw were “coupon people” that were just coming in for a deal, we did get a few wonderful new clients out of it. For me, that’s more than worth the zero advertising dollars spent.
However, there are a few things I learned from my experience, and would definitely apply should I decide to do it again:
1. Don’t give away something for nothing. This would seem obvious, but business owners should really sit down and figure out exactly how much the deal will cost them in products, time, and payroll before deciding on a deal. My deal was worth $50 and most clients coming in chose to get a haircut, which ranges from $48-$53.
In other words, it would have been much more profitable for me to give a $50 gift certificate if my haircuts cost around $75. That way customers would end up spending some cash at check out, rather than just handing over the certificate and leaving — with me feeling like I had just given away something for free. Keep in mind that most of the customers who subscribe to these sites are looking to get something for nothing. Only a select few are actually looking for a new business to patronize.
2. Really think about the expiration date. Our deal was good for an entire year and I found that to be way too long. My staff and I were tiring of servicing clients with Groupons about halfway through.
When I signed up for Groupon, they insisted on it being good for a year. I’m told now they are more flexible with that and they are willing to negotiate. Personally, I would make the deal good for no longer than six 6 months.
Keep in mind that many customers will forget about the certificate and not come in until they receive a reminder email from the company a few weeks before expiration. I experienced an influx of customers that called at the last minute, and then were upset when I couldn’t get them in the same day or week. However, this wouldn’t really be a problem if your business doesn’t work by appointments.
3. Know that most everything is negotiable. Groupon makes the business pay for the credit card processing fees out of the business’ 50% of the proceeds. From my research, this is unique to Groupon and most other similar sites don’t do this.
When Groupon tried to get me to agree to a 2.5% rate for credit card processing, I almost walked away. “No thanks,” I said. “I only pay 1.7% for credit card processing at the salon, so I’m not interested in paying more than that for this deal.” Groupon immediately gave in and said, “Okay then, let me just change this to 1.7%.” When pressed, they are likely to be flexible about other aspects of the deal as well.
4. Make sure your fine print is extremely clear. Write it as if a small child is reading it (seriously folks). Even then, you will still have customers that don’t understand. I had more than one existing client buy the Groupon, disregarding the fact that it excluded existing clients. One client even thought she could not only use it, but that she could use it in increments even though it clearly stated “must use in one visit!”
5. Shop around. I used Groupon, but it might not be the right site for every business. There are several different companies out there that have the same concept and some might appeal to you more than others. There is even a new company called Deals That Matter that gives part of their share of the proceeds to local charities.
These sites have changed the way I personally think about promoting my business. Many forms of advertising that worked in years past have become obsolete, and those that do work are often out of reach financially for small businesses. Sites like Groupon are an affordable way to increase exposure and can make bringing in new savvy customers a breeze.
Paige is a native Texan who has been living in Pennsylvania with her husband since 2006. She is the owner of Hairs To You Salon in Bala Cynwyd, PA, and also does hair for photo shoots and weddings outside of the salon. Visit Paige at www.HairsToYouSalon.com.