Please forgive us for the following rant.
We’ve all seen them: “Deal of the Day,” “65%Off,” “Savings of the Day,” “Group Coupons,” “Social Coupons,” and many more with other names crop up. Each day they arrive in your e-mail.
They are great deals for the consumer. We realize what a temptation they are to purchase, and why not? I know you must be thinking that surely they bring new business to the small company offering the deal, right? Well, let’s break it down.
I think this approach works for a handful of businesses. If it doesn’t cost so much to service the customer, as with movie theaters or other businesses in the entertainment industry, this advertising approach is a no-brainer. Bring in new customers, with a modest price, and without any additional cost to the business. But in the service industry, there is a cost to every single transaction.
Let me tell you what happens behind the scenes. These internet companies call us and ask us to offer 50% off discount coupons on our services, which they will e-mail out for us. In return for doing this, they take a cut of what’s left – some want to split the 50%, others want as much as 40% of what we make after the 50% discount.
That leaves 25% to 10% for us. I think it’s genius for the internet business which sets up the deal, but as a small business, we cannot cannot cover our costs this way. Discount coupons offered by third-party companies are driving small service businesses OUT OF BUSINESS.
We need to pay our therapists and overhead. We can’t do that on what we’d make on a service purchased with one of these coupons, especially if you multiply that by hundreds or thousands of transactions. It would hurt our ability to pay rent, utilities, payroll, and taxes. While it’s a great deal for the internet company which e-mails the coupons, it is death to a small business.
We want to provide our clients with good service and be here the next time they think of massage, so we won’t be advertising through these companies. We will continue to offer specials to you, from us. Thank you for listening to our rant and looking at life through the lens of a small business person.
Most importantly, thank you for your continued support.
What a timely post. I was just perusing the News & Record’s new “Daily Deal” which is a scheme much like you describe. In addition to the crappy privacy policy for users, I was most struck by what a bad marketing vehicle it offers for businesses, precisely for the reasons you mention.