Living Social and Groupon–Are Discount Programs Worth It?

Groupon Screen CaptureDiscount programs are everywhere and nearly everyone has now heard of them. What first began as a marketing niche geared towards bargain hunters has now mushroomed into mainstream consciousness with national programs such as Living Social and Groupon. Though it took awhile, the medical community has now jumped in too, with discounts on such services such as teeth whitening, laser hair removal, laser nail fungus, and cellulite reduction just to name a few. Whether your practice has participated in such a program yet or not, it is important to understand how this phenomenon may affect your business.

The Fundamentals of Discount Programs, Are They Worth It?

First off, here is a little primer on how programs like Living Social and Groupon work. These discounting companies use massive email databases to reach the inboxes of customers. Sure, an individual can opt-out of such emails, but most people don’t. After all, you never know when something you really want gets discounted. For those people on these email lists, they get AT LEAST one new offer EVERY DAY.

The participating business will offer a service at typically a 50% discount (or more) off their regular fee. So for the Customer, instead of paying $50 for a widget, they can now get it for $25. They pay the Promoting Discount Company (like Living Social and Groupon) directly and then get emailed a voucher for redemption. The promotion can run anywhere from one day to one week and once the program expires, the offer expires. At that point, the participating company will be emailed a list of names of customers who have purchased their service, along with a redemption voucher number. However, no contact information for the purchaser is provided. This is an important point as we will examine later.

Typically within a week or two after the promotion, Living Social or Groupon will mail the participating company a check. However, for their part in writing, designing, and getting the promotion into the hands of THEIR customers, Living Social and Groupon will collect a portion of the sales. Typically that percentage will be 50%, although experienced companies who have run numerous Living Social or Groupon promotions are quite adept at negotiating to keep a higher percentage of the amount paid, often 60%. Regardless, the important notion to keep in mind is that the amount you collect as a business is often only 25% of the normal selling price, since it has been discounted to the Customer, AND Living Social or Groupon also takes their slice of the pie. So, using our aforementioned $50 widget example that has been discounted to $25, your portion of those sales will amount to about $12.50 each.

How to Make Living Social or Groupon Work for your Practice

If you are going to participate in a Living Social or Groupon program, it is very important to understand that due to the heavily discounted nature of the program, the actual service you are providing is not likely to turn a profit. Sure, the upfront money may seem like a nice, lump sum bonus, but you must also keep in mind that Living Social and Groupon customers usually have from six months to up to a year to redeem their voucher. Some never do, but don’t count on it.

Mistakes Made Using Living Social or Groupon Discount Programs

Understanding that profit is minimal or non-existent during such promotions, don’t make the mistake that many companies do in trying to immediately turn this customer onto your other regularly priced services. If you hit the customer over the head by trying to sell them “add-on” services you are more likely to alienate them than you are at selling them anything.

You also shouldn’t treat these “new” patients as second-class citizens, either. Many companies do, thinking that these people didn’t pay full price, so they shouldn’t get the same level of service that your regular patients do. This is a big mistake!

Why Participate in Discount Programs?

There is one primary reason above all for basically “giving away” your valuable services: to potentially generate a legitimately new patient. You don’t do that, however, by hammering them over the head trying to up sell them the moment they walk into your practice. You do it by pampering them just as if they were one of your very best customer. You want to make sure that your staff goes out of their way to make sure the patient feels completely welcome and that they are getting MORE – a lot more – for their money. Treat them right, ease them into your environment, and make them feel comfortable. They’ll appreciate it and may even tell their friends about your great service. After all, aren’t referrals the best form of new business?

Something you absolutely should do is making sure to collect their contact information such as mailing and email addresses. Though you may not have made any profit from their initial service, Groupon and Living Social customers should really be viewed as a marketing expense. Done correctly, this can actually become a very inexpensive form of advertising since the cost of the service was ideally offset by the discounted payment you received. Think of it this way: when you advertise, you are hoping to attract new patients. Until they actually buy something from you they are merely a lead. That is the very same way you should view your Groupon or Living Social patient – as a lead. Treat them well, add them to your database, and systematically market to them just as you would any existing patient. Do this, and eventually that “freebie” patient may actually become quite profitable.

About Stephen C Fox

Stephen C. Fox is the Founder and President of MedaVenture which provides management and consulting services for hundreds of aesthetic medical practices throughout the United States and Canada. For more information on MedaVenture and what they can do for your medical practice go to www.medaventure.com.
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