Oregon Chiropractors & Dentists Ban Groupons

The Oregon Board of Dentistry has banned the use of Groupons by the states dentists... and Oregon's chiropractors have followed suit.

Groupon seems to be an either love them or hate them marketing tactic as shown in the very strongly worded comments on our post Are Groupon Deals Killing Your Medical Spa.

Here's the Groupon that started the debate:

And here's the Board of Dentistry's newsflash banning Groupons for Oregon dentists.

!!NEWSFLASH!! Internet Coupon Advertising!!! Please Read!!

The Board has recently become aware of different companies soliciting Oregon licensees to enter into contracts for marketing promotional services between the licensee in the company to promote voucher systems for potential patients. The Board has preliminarily determined that these may violate the unprofessional conduct rule OAR 818-012-0030(3) which prohibits offering rebates, split fees, or commissions for services rendered to a patient to any person other than a partner, employee or employer.

The Board suggests that until this can be fully reviewed by the board, licensees proceed with caution and if they feel necessary seek legal counsel on this matter or contact board office at (917) 673-3200.

Source: Oregon Board Of Dentistry

Of course the Oregon Board of Dentistry is not the only professional organization to come down against Groupon. The Oregon Board of Chiropractic Examiners (OBCE) also decided not to amend its fee splitting rule to exclude such sites as Groupon and Amazon's Living Social.

OBCE decides not to amend fee-splitting rule

Groupon Issue July, 25, 2011

The Oregon Board of Chiropractic Examiners (OBCE) declined to begin rule making to amend the prohibition on fee-splitting on their July 21st meeting at the University of Western States. This decision means Groupon type fee-splitting arrangements are still prohibited for chiropractic physicians.

The OBCE has been reviewing the issues of group bond and similar Internet or other marketing programs for several months. They had potential draft language produced by the administrative rules advisory committee along with the dissent by one of their members outlining the potential problems with the language. (Note: The Summer 2011 Back Talk quoted testimony in support of Groupon.)

Arn Strasser DC, appeared before the OCBE and made a statement in opposition of changing the rule stating, "... the question is what the schemes such as group on, where we would join restaurants, nail parlors and tanning salon, along with medical providers such as dentist and cosmetic surgeons, due to our credibility and how the public perceives us? In my opinion, offering discounted services in the fee splitting away with companies such as group on undermines our credibility..."

OCBE members were concerned that changing the rule with the potential for problems and unintended consequences. They cited the difficulty in trying to craft a workable exemption.

The OCBE also heard that two other such marketing programs have changed their set up for health professionals from a fee splitting arrangement to vastly marketing program ( living social and Fox 12 daily deal). OCBE members wondered why group on could not do the same thing? (The question has been posed the group on but no answer has been received yet. ) they felt it would be better if the advertisers change their program for health professionals, instead of the OCBE amending the fee splitting rule prohibition.

Source: The Oregon Board of Chiropractic Examiners (OCBE)

So is this it? The start of a global Groupon boycott that will eventually spread from Oregon dentists and chiropractors to medical spas and laser clinics in every state and end the daily deals industry?

I doubt it. We expect this is pretty much a medical industry issue--perhaps one that will be limited to Oregon (although we suspect other states will now be looking at it, too). But it does impact Groupon's total market opportunity somewhat.

It does surprise me that it's the dentists and chiropractors that seem to be taking the lead on this and not the physicians.

Thoughtful comments welcome.

Recommended reading: Are Groupon Deals Killing Your Medical Spa

If You're Not Getting Paid What You're Worth, There Are Only Two Possible Reasons...

Are you getting paid what you're worth?

In reading through the comments on my post  "Are Groupon Deals Killing Your Medical Spa?" it's obvious that there are some very strong feelings about pricing, Groupon, and the prices that some clinics are able to charge, or not.

Then there's any number of discussion forums on Medspa MD where you'll find a common thread around dissatisfaction with what someone's making as an employee, from the physician owner to the staff.

At the core, it's really around the perception of value on the part of the buyer, whether the buyer is a patient looking for Botox, or an employer that's staffing a clinic.

Here's what technologist Seth Godin has to say about value and what you're worth:

If you’re not getting paid what you’re worth, there are only two possible reasons:
1. People don’t know what you’re worth, or
2. You’re not (currently) worth as much as you believe

The first situation can’t happen unless you permit it to. If you’re undervalued, then you have a communication problem, one that you can solve by telling accurate stories that resonate.

Far more likely, though, is the second problem. If there are reasonable substitutes for your work, and those substitutes are seen as cheaper, then you’re not going to get the work. 'Worth' in this case means, "what does it cost to get something like that if something like that is what I want?"

A cheaper substitute might mean buying nothing. Personal coaches, for example, usually sell against this alternative. It’s not a matter of finding a cheaper coach, it’s more about having no coach at all. Same with live music. People don't go to cheaper concerts, they just don't value the concert enough to go at all.

And so we often find ourselves stuck, matching the other guy's price, or worse, racing to the bottom to be cheaper. Cheaper is the last refuge of the marketer unable to invent a better product and tell a better story.

The goal, no matter what you sell, is to be seen as irreplaceable, essential and priceless. If you are all three, then you have pricing power. When the price charged is up to you, when you have the power to set the price, there is a line out the door and you can use pricing as a signaling mechanism, not merely a way to make a living.

Of course, the realization of what it takes to create value might break your heart, because it means you have to specialize, take risks, create art, leave a positive impact and adopt generosity in all you do. It means you have to develop extraordinary expertise and that you are almost always hanging way out of the boat, about to fall out.

The pricing power position in the market is coveted and valuable... The ability to have the power to set a price is at the heart of what it means to do business profitably, so of course there is a never-ending competition for pricing power.

The curse of the internet is that it provides competitive information, which makes pricing power ever more difficult to exercise. On the other hand, the benefit of the internet is that once you have it, the list of people who want to pay for your irreplaceable, essential and priceless contribution will get even longer.

So the real question to ask yourself is if you're really irreplacable and essential as a business or as an employee.

For medical spas or clinics this means that your offering is not comoditized and that you're offering is not /can't be replicated.

Unfortunately, most clinics seem to tag along with a t me-too idiology that seeks to find what others are doing that makes money, and then offer the same thing at a reduced rate. (The Groupon rush is just one indication of that.)

Making your services irreplacable and unique will go a long way to giveing you pricing power.

Related Posts

Groupon: Are Groupon Deals Killing Your Medical Spa?
Pricing: Pricing, Cognative Dissonance & How To Charge More

Are Groupon Deals Killing Your Medical Spa?

There's a deluge of Groupon offers from Medical Spas who are using cheap laser hair removal treatments to gain new patients... Is it working?

This Groupon tactic is used by skin clinics who are desperately trying to get new clients and don't know how to market effectively or drive perceived value.

Let's take a look at some of these offers and run some numbers on how effective, or ineffective, this will be for your medical spa or laser clinic.

Here's the first of the offers for laser hair removal that I've received from a local laser clinic in the last two weeks. (I think I've received five or six.)

This Groupon offer is from Enlighten Laser Cosmetics of Bountiful, UT.

Okay, so let's take a look. Enlighten is offering an 84% discount on laser hair removal from a starting price of $617 for a savings of $518.

The starting price seems about right for what the average cost of most 6 series laser hair removal treatments are in the area so that appears about right. Since they've sold 700 treatments the can't be unhappy about that since it appears that they're getting swarmed with new clients. Let's dig a little deeper.

The selling price is $99. Groupon takes 50% so Enlighten is taking $49.50 for each sale. They may have sold many more than 700 but let's go with that number. So, with 700 sales at $49.50, Enlighten is bringing in a respectable $34,650 from Groupon...

So let's break down that number and see what we find.

With 700 sales at an average of 6 treatments we see that that gross number of $34,650 comes in at a mere $8.25 per treatment. ($34,650 / 700 = $99 / 6 treatments = $8.25 per treatment)

Not so good.

That's $8.25 before any labor, rent, treatment tips, appointment scheduling or anything else. It also ties up around 4,000 or treatment room time that this laser clinic won't be able to use for other treatments. They'll also have to deal with all of the support issues; phone calls, appointment setting, consultations, equipment depreciation and the inevitable complaints and patient issues that arise any time you're treating a patient population of 700 individuals.

If you've ever sold gift certificates you know what I mean. You sell a boat-load in December for the holidays and then starve in January and February as your rooms are booked delivering the services and no money's coming in.

So, what is the most likely scenario?

Enlighten laser clinic is going to skimp on treatment time.

Instead of performing a complete treatment, the staff is going to be under a lot of pressure to get these patients in and out. One likely scenario? They'll cut a 45 minute treatment to 30minutes. They'll perform skip treatments where they're not covering the entire area but treating every other one. They'll have a waiting room stacked six high or schedule patients only on off hours... All of these can lead to exactly the opposite result that Enlighten is looking for, happy repeat clients.

I'll also note that as I've spoken at length about before, the people buying these Groupon deals are coming for price, and they'll leave it just as quickly... Not the patients you're looking for.

Here's another laser hair removal offer from Lisse Laser & Aesthetics Medical Spa in SLC, UT.

This offer arrived in my inbox early this morning so it just started. They have 101 sold deals now but it doesn't end for 24 hours so they'll probably sell many more. (Note: While I wrote this post their sales have climbed to 371 in about 40 minutes.)

Lisse Laser & Aesthetics Medical Spa is taking a much sneakier approach. They're listing their value at $2000 in value.

Here's Lisse's Groupon offer:

...for $145, you get six laser hair-removal treatments on the lower or upper legs (a $1,000 value for women, $1,400 value for men), lower or upper arms (a $700 value), or Brazilian bikini area (a $1,000 value for women, $2,000 value for men)

So again, six treatments but at least they're making an extra $23 per patient. Let's do the math again.

$145 per sale / 6 treatments = $24.16 per treatment.

Lisse is going to have all of the same issues and problems with scheduling, service, appointment setting and the rest as well.

(I'd be interested to hear how those medspas that are using commission (which I personally hate) to pay their staff feel that this kind of discount effects both the level of service and the commission structure. If you have a thought on this please comment.)

And there's another problem.

Selling your services at this type of discount positions you in the marketplace as the cheap player in town. You'll never be able to control your pricing. You'll never be able to create steady, repeat buyers that pay a premium for your services. You'll never be able to bring in the bigger treatments and you'll always have cash flow issues.

• Read: Your Medical Spa Pricing, Cognitive Dissonance, & How To Charge More

Instead, you'll always be scraping along at the bottom of the barrel... if you can survive this type of cut throat slash-and-burn price war.

I can see that Groupon is doing a great job of selling their deal to laser clinics just by the endless stream of deals.

For Groupon this is great. They just made $34,650 from Enlighten by sending out an email... but Enlighten is the one who's stuck delivering all of the services, making all of the appointments, dealing with the customers, and putting their reputation and business on the line, including the potential of any issues that hit their malpractice insurance or medical licensure. (I'm not saying this will happen, just that the risk is entirely on Enlighten and the physician, not Groupon.)

Undoubtedly, there are some occasional successes and I've heard from clinics that claim that they love Groupon, but I've never heard from a physician who was paying the bills that this worked well. It's often the staff that like this since the clinic is now busy, but the physician owner is the one that's not making any money and still paying out.

Here's a quote from a business that ran a Groupon offer.

After three months of Groupons coming through the door, I started to see the results really hurting us financially. There came a time when we literally could not make payroll because at that point in time we had lost nearly $8,000 with our Groupon campaign. We literally had to take $8,000 out of our personal savings to cover payroll and rent that month. It was sickening, especially after our sales had been rising. So the experience jaded me, and the interactions with the few bad Groupon customers we had jaded our staff. After all of this, I find myself not even willing to buy Groupons because I know how it could hurt a business...

This business owner goes on to tell of her experience that the Groupon clients also lambasted her business on Yelp and other review sites with negative reviews.

If you have an opinion on this or experience with Groupon, please leave a comment.

Additional posts on Groupon:

• Medical Spas & Groupon Group Buys
• Your Medical Spa + Groupon
• Groupon & Fee Splitting
• Groupon post on Techcrunch

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.

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.

Groupon & Medical Spa Offers

Groupon is gaining traction in a number of cities and doing a fair amount of business if their testimonials are a real indication of what's going on.

I received an offer last week from one of the local medical spas in the area for 50% off of some general day spa treatments (facials and massage).

I can see that you might generate some real traffic by offering high demand services like laser hair removal, but they might end up loosing you money since Groupon also takes half of all sales generated by the offer.

Is ayone having real luck generating traffic with services like groupon? Has anyone tried it?

---

Medical Spa MD Members get a Podium patient review marketing account and save $1,257

Protect your reputation. Get new patients. Medical Spa MD Members receive a special, full service Podium account that includes: no setup fee (save $300), a 10% discount forever (save $330/year) and on-demand patient review marketing training for your entire staff ($597 value).  This offer is not available anywhere else.