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« What Are You Worth As A Physician | Main | What's Standing In The Way Of Your Medical Spa's Success? »
Tuesday
Jan042011

Your Medical Spa + Groupon

Does it make sense to promote your medical spa with Groupon?

Groupon is a “daily coupon” website. It’s basically an email list that charges advertisers to send out their “coupons” called Groupons.

Many small businesses I’d likely never hear about otherwise send me their coupons this way. I receive them mainly to see what’s up… because the city I receive them from is 2 hours away, I don’t expect to take advantage of them.

I've noticed that for the most part, these are not large mainstream businesses. They are small businesses – spas, bakeries, etc. that likely don’t have large advertising budgets and think that Groupon is a great way to drive traffic without spending marketing dollars.

At Groupon, they have an email list of over ten million people and if you contact Groupon to be included on their “deal-of-the-day”, you can get the word out about your medical spa to thousands of people you would otherwise never be able to reach.

There are usually huge discounts involved (50% or more) to incentivize buyers and the general idea is that by offering a big discount on your products or services, people will try out your offerings and keep coming back for more. On the surface, it sounds like a great way to market your business and I was really excited about the idea until I thought about it some more and did some analysis. While Groupon might work for a small subset of local businesses, here’s why I don’t think Groupon is a good fit for the majority of medical spas out there.

Using Groupon will cost your medical spa an arm and a Leg... and another arm.

You might have read some Groupon horror stories already, but the reality is that Groupon is extremely expensive for a business. If you look at their faq, they give off the impression that running a Groupon campaign is free. They collect the money online from prospective customers, send you a check and mail out the coupons automatically.

What is not explicitly spelled out is that they take 50% of your revenue as a fee for using their service. So given that most Groupon campaigns offer the end customer around 50% off, let’s run some numbers here. Say your product retails for $100. By giving a 50% discount to customers, you will only make $50. After Groupon’s 50% cut, you only get $25 for something you normally would charge $100 for. Depending on what your markup is, it better be more than 400% otherwise you could potentially lose money on every transaction!

What’s attractive about Groupon is that they run the campaign for you and simply send you a check. It’s not until later when you have to fulfill orders with these ridiculous discounts do you realize how much money you are potentially losing out on. Most medical spas that are using Groupon—and there are many of them—tend to try to limit their 'deals' to services like laser hair removal and IPL treatments rather than Botox or cosmetic surgery to limit their exposure to services with high fixed costs. But whatever you're offering, it's questionable that taking a huge loss on hundreds of services will prove beneficial to your clinic's bottom line in the long term.

While I'm not absolutley against using Groupon in any way, there are some issus that you want to be aware of around how using Groupon will actually hurt your medical spa or cosmetic clinic.

Groupons don’t make your medical spa memorable.

I’ve got some experience using Groupon a few times as a consumer and you know what? Every time I've purchased through Groupon, what stands out in my mind after my purchase was not the business itself but how great of a deal I got on the product or service. In fact, I remember talking to friends about what a killer deal I got through Groupon. Not once did I mention any details about the business that I was actually purchasing from. I was too excited about the bargain itself.

Using a Groupon takes the spotlight away from your business. After all, it was Groupon that provided your customer with the coupon and the unbeatable deal. It was Groupon that made your customers’ purchase exciting and fun. As a result, customers are far more likely to brag about Groupon and not your clinic.

Groupon deteriorates the perceived value of your medical spa.

Whenever a store offers an incredible deal or discount, there is this perception that the markup was already ridiculously high. If company X can offer a 50% discount and still make a good profit, then they must be jacking up their prices. Once a customer receives a large discount, it trains them to wait for later coupons and deteriorates the value of your products and services. This is especially true with medical spas since Groupon is saturated with them.

There is this dining card I sign up for almost every year called “The Passport” card which entitles the card holder to a free entree at select restaurants when another entree is purchased. The card lasts exactly one year until it expires and you have to pay to reactivate it. One year, we decided to let the card expire and you know what? We refused to dine at “Passport” sponsored restaurants during this period because it didn’t seem worth it without the card. We were so used to getting a free entree that we didn’t want to pay full price again.

While this principle applies to coupons in general, the price erosion caused by a Groupon are infinitely worse because the discounts are so steep.

You can bet that the majority of the new clients you attract through Groupon will be visiting your competition next month. You've just invited all of these new users to price shop you.

Groupon hurts your loyal clients.

Don’t you hate it when you are a loyal customer of a product or service only to find out that the company started issuing huge discounts for new customers only? This happens all the time with cell phone carriers and it really pisses me off. Using Groupon has a similar effect on your regulars and your loyal customer base.

By taking a loss using Groupon to obtain new clients and patients, you are essentially forcing your loyal clients to make up for your losses. And this is counter-intuitive to the way you should be doing business. Your regulars should be the one rewarded with discounts and perks.

There are 2 possible outcomes when a regular customer sees one of your Groupons and both are bad. In one case, your loyal customer could get pissed off and consider shopping with a competitor. But more likely, your regular customer could buy a S@$% load of Groupons and only pay a fraction of the price for what they normally would spend at your store. In effect, you would be losing out on future business with this customer because you would be taking a loss or breaking even on what could have been a 4X profit!

I've had experience with this first hand through another service. Some of our most loyal—and profitable—clients found out about some discounts and switched to them. All we could do was smile since there was no way that we wanted to make waves with our existing clients. We just quietly folded our program and smartened up.

Conclusion

Outside of the issues I’ve already covered, the main problem with Groupon is that the longer term effects are extremely hard to measure. It might be possible to measure repeat business somewhat but it’s almost impossible to measure the word of mouth effect.

To sum it up, I think of Groupon as a shortcut with major consequences. The attraction is that you’ll get a lot of customers upfront, but once everything is said and done, you’ve lost a lot of money and the long term benefits are questionable.

My general philosophy in business is to focus on the long term. Instead of trying to get a one time flood of customers, why not put forth your efforts on making your business stand out? Be the store that everyone wants to shop at because you are awesome and not because of a coupon. Be the medical spa that offers the best customer service. Be the clinic that gives customers the best experience. Giving a one time discount isn’t going to win over any followers and you risk damaging your medical spas real business.

Reader Comments (13)

Never thought it was worth it. Groupon is for coupon chasers who don't value your service but will run to the next cheap offering. That's the bottomline. Thank you for confirming my thoughts on NOT choosing Groupon for my business.

Groupon is absolutely not worth it. They have contacted us multiple times and it just does not make financial sense. Everything Jeff stated in the post is correct.

01.4 | Unregistered CommenterLH

I agree with Jeff too. I tried Groupon and have to report a net loss on the whole. We were overwhelmed with patients that came in for (almost free) treatments and we never saw them again. I would only recommend Groupon under the most extreme conditions for most clinics. I can't see that I'll ever use them again.

01.5 | Unregistered CommenterDermgal

Glad to read this. Our esthetician was contacted by Groupon and then presented the offer to me. I immediatetly thought it was a terrible way to get new business. I've printed this out for her to read. Also, I agree with offers for "new" customers only - I've always personally hated that and will never due that to our clients.

01.10 | Unregistered CommenterInnovaMed

I absoutely agree with your assessment of Groupon and other similar sites. While I believe it has it's place for some businesses, I do not believe it should be allowed for any medical procedure other then to offer a FREE consultation. Just last week Groupon sent out a deal 20 units of Botox or 40 units of Dysport for $79.00. This is just unbelieveable to me. This kind of deal not only hurts the brand name of Botox, but it really degrades the industry of medical aesthetics. Client loyalty is important and while we maintain many loyal clients, many of them have told us that they will buy deals like this. My response to them; what is most important to you price, safety, results or experience. Generally, results and safety are that the top, yet they still buy these deals because they believe that it is from a reputable doctor/center so why not! It is a deal to the client. The bottom line is that clients do not know or probably do not care about what the actual cost of Botox is to the business. They are just looking for a deal on Botox without any thoughts to the consequences or possible outcome of the procedure for which they are paying $79. Do you have any additional thoughts and/or suggestions on the topic.

01.25 | Registered Commenterkim dahle

There is a local physician that often advertises Botox for $5.50 a unit. Many of my patients have gone to him but many also come back because even though it's cheaper, they just don't get the same results. They spend $80 - $100 and have little to no effect or spend $200 - $300 and love it. There will always be deal chasers but if you offer a good service and charge reasonable prices you can be successful.

01.25 | Unregistered CommenterInnovaMed

As I stated on another post- we run a Groupon every 3-4 months. It has been a huge booster for the business. If it wasn't for Groupon we would have done much worse in this recession.

It IS a tough marketing campaign to handle, a lot of work and staffing hours to plan it and then to work the phones etc. But we more than made our goals and have upsold 48% of those initial Groupon patients higher priced packages. We also run special groupon patient referral specials that have brought us even more business.

The last one we ran, we did 90K in one day of business and sold another 20K in phone consults. It was worth it for us, but we are set up for high volume.

We offered Groupon's on 3 tx of LHR on a small area and we've also run them for micros/chem peels. We have been approached to offer Botox or other injectibles, but I've shied away from it because I just don't know if it makes sense from a cost standpoint. I don't want to dilute the Botox, any more than what is recommended, and I think that's what's happening in these deals I see.

IMHO, this recession and economy has created a whole new world. Selling tricks and tips that I trained my staff on less than 24months ago are now almost obsolete.

It sounds great that you want brand and client loyalty, but with all due respect to you, I have a staff that has to get paid, and most of them are single moms, with children to feed.

I'm in no economic position to let the debate over medicine vs. retail sales get in the way of a wonderful revenue producing opportunity that Groupon provides. It kept, and continues to keep, the doors open and the cash register ringing.

You can't make money on volume if you are losing money on every unit sold!

01.27 | Unregistered CommenterInnovaMed

Except I 'm not losing $- or breaking even. I am making $ on each Groupon sold, but it is a much smaller % than at regular price but that volume makes up the difference therefore proving revenue for the centers.

If I hadn't been able to figure out a way to make $ from it, why would I even do it? hello?

With all due respect Better off Now, you are not acting in an honorable manner as it relates to the practice of medicine. If you are not in a position to debate the practice of medicine vs retail sales then that tells me you that you are only interested in getting the register to ring. Shame on you. Use Groupon on all day if you like and as I mentioned it has it proper place, just sit back and watch what happens and see if your register is still ringing in 2-3 months. good luck

With all due respect to you, Kim, I disagree with your comments completely. I've noticed many times medical professionals do not separate the practice of medically necessary based medicine from cosmetic/aesthetic medicine. The methods used to get patients to come into an Aesthetic practice are very much like what a retailer would have to use because like a retailer, Aesthetics are a cash based business. Just because a business uses Groupon or other marketing methods, does not mean they are dishonorable, inexperienced, unsafe, etc... BetterOffNow is simply utilizing external marketing techniques to bring the patient to her practice and then providing information when the patient arrives to "add on" to the services he/she is receiving. It's all in deciding who you want to be. You can either be the "low cost leader" like I suspect BetterOffNow's practice is, where you offer discounted services and then pull more volume to make a profit (think MassageEnvy), or an aesthetic practice that focuses on service, wherein prices are higher and time spent with patient is greater (think Neiman Marcus). Either strategy can be successful when marketed correctly. If you want to research marketing methods further, Dr. Stephen Mulholland has a great book entitled "the Art of Aesthetic Practice: How to Profit From the Cosmetic Boom," which might be as beneficial to you has it has been to me. From what I have read of BetterOffNow's posts on here, I am positive she knows which end is up and I am quite positive she is successful in her business.
-Wendy Hovorka

02.10 | Unregistered Commenterwendyh

hey thanks for the shout out-Wendy.

We've been using Groupon for 1 1/2 years and the register is still ringing and we are growing larger everyday.

Kim- my job description is to make the register ring- that is why I was hired and also why I have consulting clients. I have absolutely no shame in providing services that are safe, effective, and affordable. I also have no shame in employing staff in a time when jobs are scarce. Why would I?

If I actually cared about your opinion, I suppose I could say the same to you. Shame on you for not maximizing the profits of your practice, and allowing a wonderful marketing opportunity to slip through your fingers over an ideology that medicine is "above" profit.

This disagreement that you have with me is actually one within the industry: Medicine vs. Retail.

Yo Jeff..... I'd like to answer your question but I do not have your email address. If you contact me and ask the question again I will reply.

Personally, I'm retired from the industry for medical reasons, however, I try to keep up with what is going on. I like the doc who said ,"That's a lot of bunk".

I used Val-pac a couple of times and it paid for itself, however, I am of the opinion that it brings out ONLY bargain hunters who will leave you for the next next BARGAIN. There is NO LOYALTY no matter what you do for them.

More importantly, if there is more than one operator.... Who gets the blame if the client is NOT HAPPY? Who caused the side effects or scars? The subject is too complex for the client and many operators to comprehend, particularly, in those areas where where are no schools and places where there are no licensing requirements.

When a major medical center discontinues laser hair removal... there has to be a reason. Nobody seems to want to learn or care about this. I still do NOT understand what some of these "procedures" do and do they really do it. Nobody has an answer. This causes me to wonder if some of them really work.

There is a doc who is "researching" the use of stem cells and fat. Nobody will EVER be able to reverse and/or stop the aging process without killing the patient. I remember when one of the Popes went to Switzerland for treatments with MONKEY GLANDS. Need I say more? Now we are hearing that "breast implants" only last about ten years and then have to be removed or replaced. I can't even imagine my 90 year old grandmother with her stooped walk, wrinkled skin and cracking voice and a push up bra. In a coffin, some ladies will be perpetually young (if you know what I mean). How about tattoos on the skin of GERIATRIC people. The fat under the skin shrinks and the tattoo looks awful.

I understand the desire to look younger but some things are impossible. I personally believe it's all about ATTITUDE and your SELF ESTEEM. The person who projects a positive attitude and enjoys living ALWAYS has a smile. A doc friend of mine told me, "You get a feeling from a feeling". I thought about that for a long time before I agreed with him. When I go to a doc with a problem or make a repeat visit to a doc and am asked by a secretary or nurse, "How are you feeling today?", my answer is usually,"If I felt so good I would NOT be here." I usually suggest they do not ask sick people how they are as they can be awfully depressed. Try.... is that a new hair do? or You look great today, or I like that dress or necktie. Take the mind off the problem do something POSITIVE and do it with a SMILE. You will find it is contagious. Almost every docs office is full of depressed patients. Nobody talks to one another. They are NOT happy people. They prefer not to be there.I know a doc who's office was full of happy patients. They talked to one another and chatted or joked because they were going to see their doc today and he was going to make them FEEL BETTER. This doc always had a big smile for everybody and it was contagious. The patients felt better when they awoke that morning because they were going to see their doctor today.Try it.....IT WORKS.

05.23 | Unregistered Commenterlefty2g

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