Why I Won't do a Groupon
Often when I tell people that I am opening a new business, they ask if I will do a Groupon to up sales or to market it. I did think about it and I think there may be lots of advantages to doing one. First, it would be marketing, getting the name of the studio out there in a way that may otherwise be too expensive to do. Secondly, Groupons often bring a rush of people to the door. If you are lucky, you may be able to turn some of these deal-seekers into regular customers.
The more that I thought about it and the more that I heard about the experience from either customers of establishments that have run Groupons or from the business owners themselves, I find there are often more disadvantages to doing them than advantages. First, they literally take half your money (based on the discount price that you are already doing). So for example, if my monthly memberships are $129 and I wanted to run a Groupon for 50% off, then my offer would be $64.50 a month. Now if I told Groupon to take 500 of these, I would potentially make $32,500 - but once Groupon takes their cut - I would get $16,250. Now this may sound like alot, and it is, but if you take into account that without the Groupon running, if I was to land 500 members to the studio, I would get $64,500, the $16,250 doesn't sound so good! Now you could make the argument that I wouldn't be able to land 500 customers without the advertising reach of Groupon and you may be right, but in order to make the $16,500 that I would get from a Groupon, I would need to land only 125 customers! If I was to slowly earn the business of 125 people, I would not only grow my business, but I be more likely to gain 125 loyal, repeat customers and not just one time deal-seekers.
Many establishments that have run these Groupon deals, cannot handle the influx of people that come through their doors. I have heard many times that the companies' current customers are the ones that pay for this. The current customers are suddenly crowded out, often told that they need to make advance reservations to insure their spots to get serviced, etc. Regular customers often no longer get the quality of customer service they got before just because the company is trying to keep up with the Groupon-ers. This is a shame. I always thought that it was weird that companies tend to reward only new customers and not their current customers (the ones, by the way, that are keeping them in business). I understand wanting new customers, but I will never try to gain new customers at the expense or inconvenience of my regulars.
Now I know that the economy is tough and that everyone is looking for deals (myself included) and that's why I will give free class cards to those that are truly interested in checking out the studio, and to my instructors and my employees to give to friends and family. I will also regularly run specials and referral deals. I truly feel that the best way to not only earn customers, but to keep customers is through word of mouth and to connect with people outside of just a flashy advertisement. Now this may mean that I gain customers more slowly, but the customers that I gain will be the customers that I keep and that's all that matters.