Using Daily Deal Sites Like Groupon in Your Local Business

Transcript

Are you interested in running a daily deal on a site like Groupon or LivingSocial but you’re worried about losing your shirt in the process?

Hi, I’m Carmen Sognonvi.

I recently got an email from a viewer who is struggling with that exact issue in her business. Keep watching to find out what advice I have for her.

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By the way, for more useful tips on running a bricks-and-mortar local business, be sure to check out my blog at CarmenSognonvi.com.

I cover everything from how to get more customers to how to close more sales.

Today’s question comes from a viewer named Wendi who lives in California. Wendi writes:

Hi Carmen,

I am a hair stylist of 22-plus years. For most of that time, I lived in Arizona but I recently moved to California and am starting at the bottom again. It’ll be a good move for me in the long run, but things are really difficult right now. I’m running a Groupon deal to help get me up and running. Now I’m at the point where I need to raise my prices, but I’m afraid to lose people. Do you have any suggestions to help me with this process?

Thanks, Wendi.

Using Daily Deal Sites Like Groupon in Your Local BusinessThanks, Wendi.

Well, Wendi first congratulations on starting this new phase in your life – while things are a bit tough right now, I’m sure it’s also a really exciting time for you.

Daily deal sites can be an effective way to reach new customers, but only if you have very clear goals right from the start.

Also, you need to be really clear on the potential downsides.

In my experience, the quality of customers who use daily deal sites has really gone downhill in recent years. In the heyday of their popularity, everyone and their mother was using these sites, so you got a great cross-section of people. But nowadays, it’s mostly people who are extremely price-sensitive who are left using those sites. And they don’t make good customers.

Also, running a daily deal can lead to a slew of negative reviews about your business on sites like Yelp. It’s a funny thing, but people who pay the least tend to be the ones who like to complain the most – even if you’re doing your best to give them a great experience.

If after knowing these risks, you still want to go ahead and do a daily deal, then here are some tips for you.

The most important thing to keep in mind is that a daily deal is a trial. Just like when you go to the ice cream store and they give you that tiny spoon so you can taste the ice cream before you buy.

So that means that daily deals are for first-time customers only. If someone’s been to your salon before, they cannot use the deal – no exceptions.

When you run a daily deal, you should have two main goals:

First, you want to upgrade them to a full-price service. And second, you want to capture their contact info so you can build your marketing list.

An ice cream store doesn’t pay its rent by handing out tiny spoons of free ice cream, right? Their goal is to get you to buy a cone.

Same thing in your business. You need to have a plan to upgrade daily deal customers to a full-price service.

I’ve noticed that most hair salons run daily deals for just a single service. That’s a mistake because what inevitably happens is the person comes in to use their deal, and never comes back again.

I would strongly recommend that you create a package that involves return visits. The reason is, you want to build in repeat visits so that you have a chance to form a relationship with the customer, and it also gives you a second and third chance to upgrade them.

For the sake of this video, let’s say that your package is $70 for 3 haircuts – when usually a single haircut costs $70. So the customer is getting a 66% discount.

When they call to make an appointment, be sure to capture their name, phone number, and email, and add them to your marketing database. That way, even if they no-show for the appointment, you can still follow up with them.

And when they arrive for their appointment, get their mailing address, that way you can send direct mail to them as well.

When you cut their hair, of course you want to give them a phenomenal experience so that they feel really taken care of. But you should also be asking them a lot of questions: What concerns do they have about their hair? What do they currently do to take care of it? Dig for problem areas.

Before they leave, be sure to make their next appointment and suggest an upgraded service based on what needs you figured out from the assessment. If they feel like their hair is hard to manage, suggest a keratin treatment. If they are bored and want a new look, suggest highlights.

Let’s say the upgraded service you’re suggesting usually costs $200. Tell them that you’ll buy back their Groupon by crediting the $70 they paid toward the new service. That way, today’s haircut is actually free, plus they can save big on their next appointment!

The beauty of this process is that it turns them from a deal-hunter into an actual paying customer. And once they get used to handing you their credit card, they’re much more likely to do it again in the future.

Also, you’ll end up with more cash in your pocket. Let’s run the numbers.

Most deal sites split the revenue evenly with you. So if your deal costs $70, you’ll only get $35.

Here’s scenario 1.

Let’s say you don’t try to upgrade the customer, and you just let them have their 3 haircuts for $70.

That would mean you’re giving them $210 worth of services, but you’re only getting paid $35 for them. That’s only 17% of the value.

Now let’s look at what happens when you upgrade them after their first appointment.

You give them $270 worth of services, but you get paid $165. You’re still discounting a bit, but now you’re getting 61% of the value – a much higher percentage than in scenario 1.

But what if the person turns down your upgrade offer? That’s fine. You should still go ahead and book them for their next haircut and let them know that if they’d like to take advantage of the offer on their third visit, you’ll still honor the discount.

You’ll make a little less profit, but you’re still getting the opportunity to turn them into a real paying customer.

Now here’s the key: since you’ve collected all these email addresses and mailing addresses, you need to keep in touch with your new-found customers.

Send an email out at least once a month, and send out direct mail at least once a quarter.

I can guarantee that most of your competitors aren’t doing this. That means that you have the opportunity to stay top of mind for these new customers.

Now before I get to our question of the week, I want to let you know that if you found this video useful, I would encourage you to sign up to get email updates from me!

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Ok, now it’s time for our question of the week!

Do you use daily deals in your business? What does and doesn’t work for you?

I’d love to hear your thoughts, so leave a comment below!

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