If you don’t know GroupOn, it’s a website that offers great discounts for it’s users. If you are a member you can make great savings – up to 90% – at local restaurants, salons, cinemas, hotels, etc. It’s a brilliant idea and it’s a company growing very, very quickly.
As a beauty salon, you could have the ideal offering that fits into GroupOn, you just need to make sure you can afford to make the offer.
Create New Clients
For the suppliers of the offers, the idea is that if you create a great offer and GroupOn put you in front of potentially thousands of local people that fit the profile of your business. It’s then down to you to create the loyalty and either up-sell to them when they are there, or turn them into a regular customer.
That said, you are effectively creating a loss leader in a similar way to the supermarkets. But… it could be one hell of a loss.
For instance, if you offer a £20 treatment, the average sort of offer seems to be 70% off. So already you are down to a £6 sale (70% of £20). You then share that money with GroupOn – after all they have done the sale.
So, your £20 treatment is now worth just £3 to you – £2.50 if you are VAT registered.
Granted, that £3 sale could generate a loyal client but I have two personal worries, and both stem from experience of running the beauty salons and trying various offers:
Firstly, I would wonder if someone who is looking for 70% off bargains is someone who would then go on to be a full paying regular client. I would also question how loyal that person would ever really be to my salon if they love a great offer.
It also creates an expectation with bargain hunters.
In one of our salons about three years ago, our sales weren’t great so we started doing some great monthly offers. They were popular but our cash flow reduced because of the decrease in revenue. I also heard people actually shying away from buying treatments or courses because they would ‘wait until they are on offer again’.
Secondly (and this was the main stumbling block for me as our salon is quite busy at the moment). If we started earning just £3 from a 45 minute treatment we would be seriously jeopardising our cash flow and client loyalty.
If just 100 people took us up, we could be losing £1,700 in lost sales. Meanwhile my costs of paying staff and running the salon would be the same.
We’d also potentially be turning down our regular clients who are already loyal.
I think GroupOn is a great idea and I think it fits some business models perfectly. But, it’s worth deciding if it fits your beauty salon business.
In a beauty salon, where every therapist has to earn their money, can you afford to be paying your therapists what you pay them + the overheads of your business, and take around £4 per hour in sales?