Neevita.net

Back in Jan of 2010, when I had just left my part-time day job to pursue my massage career and spend more time perpetuating my true life goals, it was suggested to me that I check out Groupon as a way to get clients in the door. At the time it was new, and there weren’t a lot of stories out there about the impact and effect these discount programs were having on real life businesses. I am posting about my experience so that, hopefully, some people may avoid the pitfalls I fell into.

At the time, somehow, it seemed like a good idea to cut my already low massage rate by 75%. It seemed fair, somehow, that I did all the discounting, and split the take-home pay for each voucher 50/50 with Groupon. It seemed reasonable that Groupon made a chunk of money from me for an hours worth of ad creation and a spamming of their email list, and then let me spend the next year working the deal off. After all, I was getting my business name in front of like, 75,000 local Seattle people!

Truth be told I did it because I was desperate for a client stream that I didn’t have to spend every waking minute thinking about ways to get. Insanely expensive advertising that didn’t cost me anything up front and guaranteed I would have my hands on people seemed the better alternative to conventional ads which could potentially deliver nothing at all, and would cost me money I didn’t have.

And get my hands on people I did! For a while, it seemed like I’d made a great decision. I loved seeing my schedule so full seemingly so effortlessly. One of my first Groupon clients returned the next week, and came back another time as well. I was slammed solid with Groupon clients for the first 4 months, from the day my deal was put on the site.

I could generally get the new people back in within two weeks if they chose to schedule again, and I had my Groupon stash to keep me afloat for the first half of the year. Things seemed to be really going my way.

Now, I’m sorta hoping that whoever made Groupon ~$4500 in an hours worth of work at least broke a nail typing or something.

I found some amazing clients that have stuck with me and continued to return over this last year, a few really nice people who came back a few times and faded away after a while, and for that I feel incredibly lucky. Of the 194 Groupons that were redeemed, I had 10 people come back once, 6 people come back twice, two people come back 3 times, and 3 people come back regularly. Additionally, I had about 30 Groupon people schedule throughout that year, and either noshow or cancel their return session.

That’s about 11% return, which is decent. However, I got many more of my current clients during the year-long deal through word of mouth and good reviews than I did through the intense and stressful year of massive discounting through Groupon. And being booked solid with the Groupons for months at the beginning and end of that year limited the clients from other full-paying sources I could take.

I also took my first real vacation in part due to the money I had up front from Groupon, was able to sustain myself through a bike accident in which I had to take a couple weeks off and seek continual medical care, and enjoyed my first year of living from my own business. Yay!

But that time was borrowed. Doing Groupon, particularly as a single practitioner massage business with limited resources and hours, was like getting a payday loan or a high interest credit card, and pretty risky. Maybe not the smartest thing I’ve ever done.

I charge $60 an hour for my massage work, which is the lowest I can charge with the volume I’m able to see without relying on tips, which I want to avoid.

Averaging about $40 a massage including repeats from the promotion and the coupons that were not redeemed, I made about enough to cover my living expenses and the cost of business (the office, sheets, licensing, CE). If all 300 Groupons had been used, or even another 50, I would have gone under.

And that’s not counting the no-shows on return sessions, of which there were many, only one of which actually paid my cancellation fee.

In my situation the possibility of upselling or having a table of Groupons order a bottle of nicely marked-up wine from my restaurant was nonexistent. Even with a cap as small as 300 Groupons, in order to make up for the revenue shortcoming in offering my service for so little, more of them had to come back than have come back.

The reality of the unsustainable nature of the Groupon business model was sobering to say the least. Why would Groupons target market come back to me to pay full price when there is another massage deal on Groupon every few days? Why, indeed – and they didn’t, and Groupon is full of shit when they say that the main pull for businesses to sign up is that people will come back.

The last few weeks have been unbelievably stressful, disconcerting and scary. Just trying to figure out how to handle the people who call, admit to having waited 11 months to try to schedule a massage with my single-practitioner business, then ask me to extend the promotion because they’re going on fucking vacation, has been borderline traumatic. These are not good clients. They are not the kind of people I want frequenting my business. And they are not the kind of customers Groupon promises in their marketing.

One thing I can absolutely thank Groupon for is this clarity: When I offer incentives to attract clients, they will be perks and additions, not a ridiculous discount on my rate. I’d prepared for it to take 5 years to get to where I really wanted to be with my business, build up a good client base and reputation. I suspect that aligning myself with things like Groupon is a really great way to not accomplish that.

Technically, Groupon did what was agreed when I signed up. That said, I have absolutely no interest in doing something like this again, and within a month of seeing a year of Groupon clients I’d stopped using the service myself. It just didn’t interest me at the time, and now, I really get why.

Groupon and services like it are just another version of the corporate vampire. For every business it helps, more are crushed by the largely discount seeking, non-returning clientele that mass discounting attracts and encourages — meanwhile, Groupon presents itself as a business saver and client factory. In reality Groupon is feeding off the fears and insecurities of desperate people in a crappy economy, further devaluing and deprecating the dollar and our hard work, and making money hand over fist doing it. Ingenius? Yes. Good for anyone in the long run? I really doubt it.

As a customer, if you use Groupons, please do so consciously and understand what these businesses are sacrificing in the hopes that you may walk in the door again.

6/14/11 – Here’s another take on it: http://techcrunch.com/2011/06/13/why-groupon-is-poised-for-collapse/