Medical Spas & Groupon Group Buys

Group Buying & Medical Spas

Social networks and social media (Facebook, Twitter, blogs, etc.) get a lot of attention as marketing vehicles in the cosmetic medical world, and with good reason – your potentail patient are already there and are spending more hours being social online than ever before. However, another major marketing movement may have a much larger impact on how medical spa marketing is changing... discounted group buying sites.

How Group Buying Sites Are Impacting Medical Spas & Physicians

A recent Forbes profile on Groupon reported that the group buying site’s sales have reached $500 million and that the company’s valuation is now $1.3 billion. Groupon will be the fastest company ever to reach $1 billion in sales, and they were profitable seven months after inception. In just three years, there are now 200 competitors to Groupon in the U.S. alone (over 500 internationally, says Forbes), and this number is growing — not to mention the likelihood that Facebook, Yelp, Foursquare, and niche publishing sites seem likely to get in on this model of selling. Clearly, group purchasing has resonated with the market... including medical spas, plastic surgeons and cosmetic physicians.

This model is simple: a massive discount with urgency and strong merchandising. In Groupon’s case, a 50%+ discount will definitely drive sales. (It’s important to realize, however, that they are unprofitable sales. According to the article, the retailer only gets half of their discounted deal, netting only up to 25% of the list price. No, the retailer doesn’t make money; however, they do get eyeballs on their company and product. The bet is this exposure will attract full price customers, offsetting the loss.)

A couple things will happen with medical spas that advertise on sites like Groupon. First, it's difficult to get off the “crack” of sales from these deals. Groupon reports 97% of their retailers want to be featured again. And with 200 group buying sites, and more coming, many retailers may just make the rounds of discount after discount. This is a recipe for losing money and commoditizing your entire business with treatments that are not turning a profit. Unless – and this is the big caveat – your medical spa sees sustained profitable sales from returning customers.

Of course this is the same methodology that many of our Select Partners use to aggregate the bying power of our individual physician members to drive down the cost across the entire network. Examples would be when Sciton offered $15,000 of of a new BBLs IPL platform and the $349 Group Buy Botox offer.

Which brings us to the second and more salient point: Groupon reports only 22% of customers who buy a deal return to buy full price. (There are no statistics about cosmetic medicine deals on Groupon). If you're dealing with treatments that come with high fixed costs that can cause all sorts of problems, especially if you have any form of 'commission' payments with your staff.

Discounted medspa customers only return if:

  1. They had a great experience with the product or service.
  2. If, at full price, the experience is still a great value.
  3. If they're not hopping from discount to discount, which many of them are.

What percentage of medical spas will clear that high bar? Medical spas and physicians must become amazing to attract profitable customers back, or they may discount themselves out of business with unprofitable treatments that are filling their treatment rooms, and that’s where Groupon shines a light on the need for a superior customer experience.

Most medical spas try to get around the 'loss leader' aspects by offering treatments with no consumables (Botox, Restylane, Juvederm, Thermage etc.) and offering purely cosmetic treatments like facials or high margin treatments like laser hair removal.

If you've had an experience with Groupon or other group buy site's, please leave a comment and let us know about your experience and what you learned.