Can daily deal sites Improve your bottom line?
By Eddie Childs
In recent years, group-buying sites like Groupon, Scoutmob and Living Social have given rise to a younger, more affluent and tech-savvy generation of coupon-clippers interested in indulging new experiences. This unique combination of social networking, collective buying and rock-bottom prices has spread across the Interwebs like wildfire. And many such sites offer these deals daily.
Undoubtedly, though, some people are standing at this phenomenon’s periphery scratching their heads. Sure, it’s easy to see why these deals appeal to consumers, but how do they work for vendors and retailers? Even more importantly, are they something chiropractors should consider for boosting the bottom lines of their practices?
In and of themselves, of course, coupons aren’t exactly a revolutionary idea. By most accounts, they were initially conceptualized in the late 19th century, when drugstore owner and medicine manufacturer Asa Candler issued paper tickets redeemable for free samples of his newly purchased Coca-Cola formula in order to get people to try it.
Although classic bargain hunters generally search out essential items like bread and milk; those populating daily deal sites’ email lists are looking for something decidedly different—namely, the novelty of a new product or activity. Remarkably, even in the midst of a recession, these sites have influenced consumers to crack their wallets and spend cash on goods and services they otherwise might not have considered.
“The business model is actually pretty simple,” says Chris Attebery, CEO of Local Stomp, an Atlanta-based daily deal site. “The vendor makes a discounted offering of their products and services, and sends it to [the group-buying site]. Afterward, we cut them a check minus our percentage for the deal that’s run for that day or however long it’s been going. That’s how most [daily deal sites] work.”
Despite the simplicity of the model Attebery describes, sales generated by these sites are by no means an insignificant blip on the economic radar. Groupon, for instance, boasts approximately 50,000,000 subscribers worldwide and claims to have sold more than 40,000,000 different deals in North America alone. To this end, the company offers bargains with local businesses in more than 500 markets across the U.S., reaching customers through a voluntary, mass-email format.
“We work with these local businesses to create a deal of the day—the merchant offers a great deal, and local potential customers subscribe or provide their email address,” says Groupon spokesperson Chad Nason. “So all the subscribers do is sign up online, get a daily email or check the website; then they can check out all these great things to do, see and eat in their local area.”
In order for these deals to work, though, a minimum number of people must first purchase it. Once this has happened, the bargain hits what Nason calls the “tipping point” and goes active for everybody.
Depending on the particular deal, the tipping point might be five or 10 or 50 people—it varies on a case-by-case basis. In any case, Nason says, this mechanism ensures local businesses receive a certain number of customers, making the bargain a worthwhile proposition.
With most local businesses, the prospect of increased revenue is probably enough incentive to offer these deals. Even if enough people don’t buy these bargains to reach the tipping point, proponents say participating businesses nonetheless are receiving a considerable amount of exposure to hundreds or even thousands of potential customers. “There’s immediate buzz, revenue and traffic to your business,” says Attebery. “These three aspects are right in tune with what [vendors and retailers] want to derive from these deals.”
For the purpose of finding new customers, daily deal sites essentially offer a powerful marketing tool for local businesses seeking to use the Internet’s power to their advantage. “It’s just such a hard thing to conquer while you’re competing against every other business out there,” Nason explains. “We have all these customers and subscribers, and we bring them to you for the day your deal runs. So it’s an interesting mix between PR and advertising.”
In this capacity, both Nason and Attebery say, their companies have run numerous deals with chiropractors extending a range of services. “It could be for a consultation or exam—something along those lines—but also other things too,” says Nason. “You might offer a deal for a related service. The idea is finding that deal that will resonate and be interesting to folks in your community. You want to entice people who might not have come before to try out your business.”
According to Nason, chiropractors working with these sites have sold hundreds of deals in a single day. He believes businesses like chiropractic practices can be extremely successful, because they’re appointment-based businesses. “You know exactly how much [customer volume] you can handle, and you can have a certain number of doctors and rooms scheduled,” he adds, “so while you’re scheduling these folks, you can try and make sure you’re taking full advantage. Then, hopefully, you can turn them into repeat customers.”
A few downfalls of offering deals through group-buying sites exist, however. As some critics have observed, the downside quickly becomes apparent for practices with other components, such as massage and spa services, where employees are—to some extent, at least—remunerated by gratuity.
“The first deal I offered was with LivingSocial. It was great, but I had a few issues,” says LIFE student Marie Vola-Stein, who also owns and operates MyZen Day Spa and Wellness Center as a massage therapist. “People that were purchasing the deals weren’t tipping on the original value of the service, which is customarily 18 to 20 percent.”
Since then, Vola-Stein says she proactively has taken measures to inform new daily deal customers they’re expected to tip. The resulting gratuities haven’t been fantastic, she adds, but they’re a little better than they were. “It’s funny, because I know a lot of companies like restaurants that won’t do any more deals because of [gratuity issues],” she explains, “and I spoke to a place yesterday that was doing 90-minute massages and people were giving $3 tips. That wouldn’t work here, I can tell you that now.”
Even considering the possibilities of lowered employee morale and sub-par tips, Vola-Stein nonetheless says the experience of offering daily deals is worth the headache. She estimates the spa’s business has increased by approximately 30 percent in terms of picking up new customers.
“It’s been awesome,” she says. “I think [it’s an effective way to expand your customer base], but then again, am I going to tell you people aren’t just looking for deals? Oh yeah, they are. What I recommend is limiting the deal to one per person, and putting a cap on it to make sure you’re able to take care of all your clients. And make sure you don’t eat the gratuity—put it on the voucher that the six-percent tax and gratuity aren’t included, and it will be collected at the front door or whatever. These are just some of the things I’ve learned.”
For his own part, however, Austin Cohen, D.C., of Cohen Chiropractic in Atlanta, says he hasn’t experienced many problems. He attributes this mostly to the nature of the deal his practice agreed to offer.
“[The deal buyer] would pay, for instance, like $25 for a full examination with X-rays but no adjusting. We didn’t offer any adjusting in our coupons,” Cohen says. “So it was $25 or $30 for the full examination, and that included a full report of findings.”
Cohen explains he felt it was important to let these potential new customers know up front that, if there were going to be any further costs, he’d discuss it with them at that visit after the report of findings. “We got a lot of great patients from it. We don’t offer massage therapy, so for us it was beneficial, because those people were looking for just Chiropractic,” he says. “The downside of it was sometimes we’d get people who were just looking to see what condition their body was in, but they didn’t follow through with chiropractic care.”
According to Cohen, it was a generally positive experience overall. He credits this success with his conviction of sticking solely to Chiropractic in what he offered. “I’d definitely use it again,” he says. “If I was going to give advice to another chiropractor, though, I’d make sure to tell them, ‘don’t give away the goods.’ Don’t give away adjustments and don’t offer massage therapy, because people will just be looking for the massage, and they’re not going to care about the Chiropractic. Just give them a discount on the chiropractic exam and that’s it.”
Also, in terms of education, Cohen’s approach may offer the additional advantage of distinguishing in new patients’ minds the two primary components of a chiropractic visit from one to another. It’s often difficult for patients to understand they aren’t coming to the chiropractor for an adjustment, but rather for an examination—the result of which may (or may not) be chiropractic adjustment.
The result of the examination, the findings, determines whether or not the patient needs to be adjusted. Thus, by using coupons to emphasize they’re two different things—both requiring expertise unique to quality chiropractic care—chiropractors can also use the coupon as an educational tool.
When it comes to the number and frequency of deals offered that pertain directly to chiropractic exams and services, some critics of the group-buying industry have expressed some doubt as to whether Chiropractic is being treated fairly.
They’ve observed the overall number of chiropractic deals is proportionately low when compared to other sorts of deals, such as skydiving packages and restaurant specials.
On the other hand, sources within the industry itself say the deals these sites offer are almost unilaterally left to the discretion of individual salespeople. These sources further explain that most of the daily deal companies try to work out deals that are mutually beneficial for both parties involved. However, they say, sales-people complain that commissions to be made from Chiropractic (and indeed most service-oriented forms of business) are often less than stellar.
Although some degree of disparity may exist between what qualifies as a “success” for a revenue-driven daily deal site as opposed to the expectations of a private chiropractic practice looking to gain more patients—some questions clearly exist as to whether these deals are actually particularly beneficial to service-oriented vendors, at least in terms of overall, tangible profitability.
Even more significantly, some critics have questioned the very ethics at the core of this phenomenon, likening it to unethical “chiropractic headhunting” practices.
While the semantics of this charge may be arguable, it nevertheless raises a very valid question—namely, is Chiropractic couponable? While a nuanced answer to this question lies beyond the scope of this particular article, rest assured TCL will address this topic at a later date.
In the meantime, it might be advisable to bear in mind one final thought: while these daily coupons could definitely do no small amount for your practice in terms of recruiting and educating new patients, they could also be teaching your patients (both new and old) how to value the service you provide in the future. And that, of course, would be at a discount price.