Every day I get e-mails offering me discounts on items and services... Mamapedia, Schwaggle, Yelp, Living Social, Facebook, CBS, and the biggie...GROUPON. Everyone seems to be putting together their own version of the discount group deal.
The basic premise is the company offers your service or item at a HUGE discount You are e-mailed to their entire mailing list and (hopefully) come out with new customers. The catch is that, after discounting your product heavily, they take half as their fee, leaving you with some small percentage of what you would normally charge.
Twirly Girls Pole Fitness received an offer from Groupon last year. We were so excited. In our eyes, it meant Twirly Girls was a reputable company. We thought the owner Bel might get 30, 40, maybe 50 new Twirly Girls out of it. Clearly, we understood that not EVERY person who did the Groupon would continue on as a student. But even if 10 girls stayed on, that would be great money for Bel.
Bel wanted to offer her taster class (a one-time class to let people try out pole dancing), which normally costs $25. Groupon usually cuts the cost in half (so, we're down to $12.50), then pays you half ($6.25). Groupon pushed for more -- they wanted her to offer a month of classes. Bel normally charges $120 for a month of regular classes. Groupon offered the deal at $49, which means Bel received $24.50. That breaks down to around $6 per person per class.
The day of the Groupon offer, some of us sat excitedly around our computers and watched the "sold" number on the website skyrocket. By the end of the day, over 300 people had signed up to take a month of Twirly Girls classes. We couldn't believe it. Bel has a small operation -- just her and one other instructor, both only working part-time. It was a little overwhelming (but exciting) in the beginning. Calls started coming in immediately and Bel was then tasked with finding space to fit all of the new students into classes appropriate for their beginner level.
If a normal student pays $120 per month for four pole classes, each class costs $30. Bel tries to keep those classes light, so one girl to a pole. If six girls are in a class, she makes $180 for each 75 minute class. For the Groupon classes, if she required girls to share a pole, there would be 12 girls in a class. If they are each only paying $6 per class, she makes $72. She's doing twice the work for half the pay. In fact, it was hard to schedule 12 girls in any given class, so she really was only making about $35 per class. If Bel paid the other instructor to do the class, she was actually out-of-pocket money.
Another issue is that people have up to a year to use their Groupon. Bel was flooded in the beginning. This Groupon expires in November 2011. She said there is a large number of people who have not turned in their certificate. This means when the end draws near, she may be flooded again. Or, possibly, some number of people will never turn theirs in and that would be cash in Bel's pocket to make up for the "hit" she's already taken.
Although I know Bel appreciated the experience, and met some wonderful people (Hello to the visual pole girls -- Bel's all deaf class), I know she would do a few things differently. For one thing, she may want to stick with just offering the one-time taster class. I also believe she would not want to leave the offer open for an entire year. Of course, she did gain some new students, and that's what the Groupon is really about -- getting new students/customers.
In the end, for a company to decide if Groupon (or any other group deal) is right for them, they really have to decide if using the Groupon-type service will result in returning customers. I know some people who just snap up these deals and will never return to a store/company again, regardless of the service or product offered. Make sure your company is ready to deal with the onslaught of new customers and that your employees are adept at selling whatever you are offering to maintain some of those customers after the deal is done.
lolorashel lives in the bay area, where she tweets, posts, and twirls about Twirly Girl Pole Fitness: women of all shapes, sizes and abilities can flourish, get their sweat on and still feel sexy!