Groupon and Clones: the real impact for a local business

Groupon is growing, you get so many clones and all what they want you, a local business, to do is to create  offers for their huge list of subscribers, and yes they present it well   They have all good sales people.

But is is really good for your local business?
They say, it let people discover new places in town.
They say it is a social buying
They say, more customer, more profit

What is the reality?

About discovering new places in town, this is true, but that is it.  When I talked with our customers, it was clear that they did it for the 50% reduction, as this is the minimum we must offer) AND it is also true that our collegues/competitors also offer good services.  It would be stupid to think that my Spa is the only good one in Geneva.
After the clients used their offer, they are happy, but only come back if is convinant for them.     So on this part you loose. => No Customer Loyalty

Another point, which maybe small business don’t take care off enough, it is the cashflow.   Groupon and clones pays out the total amount of money at the end of the offer.
Example: When you make an offer for 200 coupons, valid for 4 months, Groupon pays out 50% of 50% afer a few days and the other 50% of 50% is paid after the 4 months.
This means during the 4 months you need to be sure you have enough other customers to pay the rent, the salaries, electricity, water, products etc.
For cashflow this can be hard. => Bad Cashflow destroys your company

If you noticed, i wrote 50% of 50%, this is correct, as you need to offer at least 50% reduction, from the other 50%, Groupon takes 50%.

Example:  when a treatment cost 150 euro, and you will get only 37,5 Euro.
Some clones they play with the percentage, like BuyClub in Switzerland they take ‘only’ 30%.
If you check this, you must work without profit.   for 37,5 you can’t give a perfect massage, using the quality products and paying a person for 1,5 hours.

An other calculation:
With groupon you will get more customers, true, the 200.  Probably you want get the 200 customers otherwhise.  But, you don’t need too, to reach the same turnover, with a higher profit margin, you need only 50 customers instead of 200. (50 x 150= 200 x 37,5)
=> Numbers of clients is not the most important thing of a good running company, CashFlow, Profit, etc are.
Groupon and Clones are killing free competition.
What is happening in Geneva right now.  Beauty Salon 1 is offering 50% on manicure and pedicure, a lot of people go there to ‘discover’.  Then the offer is finished, those people goes back to there orignal place.  Nobody is winning Beauty Salon 1 is not making big profit, they only work a lot.   Beauty Salon 2 losses customers.
Then Beauty Salon 3 is doing the offers, etc etc. => Only a few will survive, i hope you are one of them

Do the Loyalty test
When we took over the spa, the Spa was using a groupon a like.  So I asked the customer to enter the client file and I offered them 30% reduction if they come a second time for the same traitment.  Only 1 % used it.  On the contrary, all our existing customers, 60% is booking again after a traitment.   I don’t need to do another calculations to proof my point.

Conclusion
When working with Groupon and Clones, you put your company in a dangerous situation.  The customer is very happy, yes they get reduction and even if it is not good, they will get a reduction in another place.  In this story, where do we talk about you, your business?

Groupon and Clones can be good to promote a new service, when you are unique in the city, but be prepared not to gain money.  The cost is the same as doing ordinary publicity with 1 big difference.  With the offers, people try out the service which is the best selling point.  But due the high reduction, everday another one, customers don’t come back as promised by them, the custoers are buys discovering other places.

In my case, we stopped working with them, and we follow up our customers.  We have more profit and we have growing numbers every month of new customers,  so my conclusion is simple.  You don’t need them to make your company big if you take care of your customers,  they need us to make there business run.

Are you using Groupon or Clones for your business?  What is your opinion? Do you have good or bad stories?

PS I will write soon about alternatives and also some information how they sell you their contracts….. (the little lines not always nice)

Advertisement