Malcolm Gibbons asks whether daily deal websites are really the answer to business stability

We are all familiar with the saturation of the one day deal sites that are flourishing on the web at the moment, (unless we’ve been living under a rock the last few months!); their gain in popularity would not have gone unnoticed by any of us as the buzz that these sites are generating in our industry is simply amazing.

I am getting asked by an increasing number of clients and industry people: “what do I think of them as a way of getting new clients?”

I work with and have been in discussion with salon owners who have used and are continuing to use these sites as a way of simplifying their marketing and generating cash-flow. And on the face of it they seem to be the ultimate way to attract new clients, i.e. you only pay when you make some sales and it is only a percentage of the fee that the websites take from you.

Because so many salon owners have asked me about these sites, I have done some research on them for the benefit of us all.

The salons that have run the promotions that I have spoken to experienced a variety of results and experiences – it would appear that on the face of it most daily site deal companies are relatively easy to deal with, however there are also reports of some that seem to make it difficult for you to market with. Most salons and spas report satisfactory to great sales of vouchers when they have run promotions – from a low of 24 sales for men’s beauty services to over 250 sales of beauty packages for women and anywhere in between, it would be fair to say that the majority of advertisers are from the beauty side of the hair and beauty industry, however, there are more hair salons getting involved in recent times. The key to all these successful sales is offering a ridiculously low price for a wide range of services; Packages are the name of the game. Many salons are excited to get involved with the trend of social shopping sites because of the almost instant cash they can generate, some salons reporting paydays of up to $14,000.00 (after commissions etc) and that’s a good payday in anyone’s book isn’t it?

So should you run deals on these sites or not? From my research, you need to approach them caution and understand exactly what it is you want to achieve from running your promotion.

There are a couple of things you should understand about the buyers:

The typical buyer generally doesn’t recall which social site company they brought the deal from (as they typically belong to many, average 5 or more). And many of them do not seem too concerned about the name of the salon. Did you know there are more than 50 of these types of sites popping up online globally, every month!?  To the client, your salon is just a commodity for delivering the service. They generally know nothing about your salon or even the terms of the deal. They can be confused. A confused client can easily turn into a difficult client. It is reported that often the client doesn’t know what actual service they have purchased. They don’t understand your offer and specifically the terms and conditions of the promotion.

And another thing, customers buy vouchers from varying sites so, when they have purchased multiple coupons from different sites for different salons all over the city, how can they be loyal to ONE salon, i.e. your salon?

These deal buyers can be much more demanding, almost feeling they are doing you a favour by coming to your business. They come to your salon with a different frame of mind. They are visiting because they got a great deal. Consequently, they are extremely price conscious and they want to make sure that they get a lot more then what they paid for. These customers are mostly much more demanding than some of your more discerning clients and that makes it hard to deal with them mostly for a one off service/s that you are not necessarily making money on. The buying site’s sales rep will tell you otherwise. They will tell you it is your opportunity to sell other services/products to these customers and also you have the opportunity to retain them as a loyal client… and that’s codswallop! And I’ll tell you why.

Firstly, these customers are deal buyers and that means they will only spend what they have already spent and have no intention of spending more (They know that your objective is to up-sell them so they are particularly wary of this) and secondly, whose customer are they? – They are the deal sites customer, why – because the deal site has another deal probably very similar to yours and markets very well to these previous purchasers to buy new deals all the time so they don’t really want you to retain them as your customers as they lose theirs. Remember, the customer is viewing your salon as a commodity and probably has already purchased their next voucher already and if not, will be looking forward to purchasing another Cheap Deal… no matter who is offering it. Many salons who have participated in these deals report only one or two clients becoming regular, and that has been the result of some very clever and shrewd marketing to them. So for the most part these buyers are one time visitors who won’t come back, and why would they when they can get a big discount from another salon when they want to?

It would pay to remember that your business is ideally built on relationships and loyalty, not endless discounting.

So to answer the question – should you participate in these sites… well there are a couple of things to consider…

The opportunity cost dealing with these clients, whilst you are busy looking after the discounted clients who generally are more demanding and take more of you and your teams time, do you have space and time for the attention that your loyal, full paying clients need?  The deal buyers are also trained (by the deal sites, and by default, you.) to want huge discounts! Is that really the best way to get clients that are willing to pay premium prices for high quality value and service that you are wanting to offer?

This type of deal making is at best a short term solution for a longer term problem.

So really by participating in the deal sites, you can attract one-time low-quality clients by discounting your services. And all that you are doing is sacrificing your profit margin long-term. It can also distract you from attracting loyal, more affluent clients. As suggested above, it is a short term fix and a harmful one at that.

When would I recommend utilising these sites?…

When a short term solution to cash flow problem, this would be the main attraction of these sites, you get a large cash injection into your business within a couple of weeks of offering the deal. So if you need emergency cash to pay the rent, then you can utilise these types of services. But you must understand and expect that for the most part these will be one time clients.

Another area of usefulness for them would be to get a supply of customers for your trainees and apprentices to gain valuable experience, therefore booking with certain people would be a condition of purchase. Remember, these customers can be difficult so gaining experience early in this area can be an advantage for the trainees and apprentices.

You can turn slow days into busy days, so limit the deal only to certain days and times during the week, thus allowing you to generate additional revenue, it is better to have some money coming in than staff standing around doing nothing.

Remember, these are all short term solutions. You may have a more serious underlying problem. Even the best salons in the world will struggle and suffer, even go broke without an efficient marketing system for attracting a steady flow of new, good customers, especially well-heeled clients.

These types of customers are the most stable in an unpredictable economy. They have more discretionary income, they tend to be more loyal and they prefer to buy value and service. You can definitely build a business around these prosperous customers.

While you could use Daily Sites as a short-term solution, you must immediately re-invest that money to implement a long-term marketing plan/system that will attract better clients who are willing to pay you higher prices for your services.