Are Discount Coupon Sites Like Groupon the Best Way to Market Your Salon Business?

Groupon and other daily deal/discount coupon sites have become one of the most popular ways for hair stylists, beauticians, and salon businesses to market their services. A quick glance at the local salon deal page on Groupon shows many special deals on salon services ranging from 52% off to 55% off or more.

Groupon and other daily deal sites have become a popular way for salon businesses to get new customers because it’s easy and quick. You can post a deal on Groupon and see new customers arrive almost immediately. But there are also some potential risks and downsides to using discount sites to market your salon business.

Here are a few of the pros and cons of using Groupon to market your salon business. We’ve also included a few ideas on how you can get the most profitable results out of your daily deal coupon experience.

Pro: Get Lots of New Customers

Groupon definitely works if you’re focused on getting new customers in the door. And the site really can quickly expand the reach of your business to a pool of thousands of new potential customers.

Pro: You Can Get a Quick Lump Sum of Cash

If you’re having cash flow problems, a discount coupon site deal can be a good way to inject a quick infusion of cash into your salon business. Depending on the exact terms and conditions of the deal site you choose, you can often expect to get a lump sum payment for all of the deals that you sell. So, for example, if you sell a $50 deal and you get to keep 50% of the proceeds, or $25 per deal, and 400 people buy it, you’ll get a one-time lump sum payment of $5,000.

And not everyone who buys a deal will actually redeem the coupon. This effect is known as “breakage” – and it’s good news for your business, because it means that when people forget to use their coupons or never show up to redeem them, you get to keep their money (because you got paid upfront).

Con: Many of the New Customers Might be Bad Customers

Unfortunately, many of these new customers might only be there to get the deal, which means they won’t be willing to come back for a second appointment at full price. If the new customers are more trouble than they’re worth, you might be better off trying a different marketing tactic.

Con: You Might Get Overwhelmed by Demand

If you’re not careful, your salon might soon be fully booked with coupon customers who are paying a steep discount. If you cannot keep up with the demand, and have to cancel appointments or end up delivering a substandard level of service, people might complain and drive down your ratings on Yelp and other online review sites.

That’s what happened to Blo, a salon and day spa in Chicago. The Blo salon sold nearly 4,000 Groupons in a single month – but that was more business than their small staff could adequately handle. Unfortunately, they soon saw an increase in negative reviews on Yelp. You can read the full Entrepreneur article here. To avoid an outcome like Blo experienced, make sure that your Groupon deal doesn’t damage your reputation.

Now, let’s take a look at some strategies that you can use to get the most out of Groupon for your salon.

  • Create a Groupon for a New Service. If you’re announcing an exciting new service or a line of products that you haven’t offered before, Groupon could be a good way to make a splash and get the word out. Keep the Groupon focused on one particular product or service that you want to emphasize, without cutting into your profits from your core business.
  •  Set a Cap on the Deal. Don’t let yourself accidentally bring in “too many” new customers, especially if you’re losing money on every coupon.
  •  Specify “New Customers Only.” Don’t give away profits by selling at a loss to existing customers who are usually happy to pay full price. Of course, with this strategy, you run the risk of annoying your existing customers, who know that they’re not allowed to get a great deal that you’re offering to new customers. So proceed carefully…
  •  Push Customer Retention. The goal of your Groupon deal should be to get as many repeat clients as possible, not one-time buyers. Offer an incentive for people to book a second appointment on the same day as their first visit.
  • Schedule your Groupon customers only on slow days of the week, or with less experienced salon staff. That way, you won’t risk losing revenue on days you are typically filled with full price customers.

For more on these and other Groupon sales strategies for salon businesses, check out “The Ugly Truth About Groupon” written by salon owner and business expert Dan Lok.

Groupon can bring an influx of new customers to your salon business, but you need to be careful not to get burned by too many price-sensitive customers who have no loyalty to your business. Instead of trying to “buy” new customers by offering steep discounts, you might be better off trying to generate more referrals by offering generous incentives to your existing customers. Often the best customers come not from big price discounts, but from more proactive networking with your inner circle of customers who already love what you do and who are willing to pay full-price.

Are you a salon owner who has used Groupon or other deal sites? What was your experience? Tweet us at @KabbageInc and let us know.

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