Tuesday, January 18, 2011

Why I Wouldn't Do Groupon For a Private Practice (and 2 Exceptions)

Unless you've been living under a rock, you have probably been heard of Groupon by now. If not, you might take a moment to visit Groupon now (or one of it's evergrowing list of competitors, like LivingSocialLocalTwist, or local newspaper & TV station ones) before reading onward.

In short, each of these companies markets a coupon promotion to a HUGE group of consumers (via a website and email list) that you can only purchase for a short time (24 hours to a few days). They are really quite a good deal for the consumer. In the last few months, I bought an Amazon Fresh deal ($100 worth of groceries for $50), a one-hour massage, and a deal from a hardware store ($20 for $40 of merchandise). Quite a good way to save money. I frankly feel a little guilty about buying the massage one, but I'm in need (too much sitting - you fellow therapists and computer people know what I mean).

But if you are thinking about ever doing this for your private practice (counseling, coaching, any other 1-on-1 service), we had better talk. In fact, STOP, do not sign anything yet. In most cases, it just is not good business.

The basic deal with Groupon looks like this: you must agree to offer a 50% discount off of your usual price. So if you're $100 a session, the consumer only pays $50. Groupon gets half of that, so you end up only getting $25.

There are several problems with driving business this way, the biggest being:
  1. Most of these discount customers will not become repeat clients
  2. If the coupon pushes you over capacity, you will lose spots that full-pay clients want, definitely costing you that $, and possibly costing you the client.
This was definitely the experience of the famous cafe in Portland - the owner of which blogged about her Groupon nightmare. When I look at any service where there is limited throughput (like only one person per hour, for example, or only 10 tables in the cafe), or a store where the profit margin is already low (most of retail, I'd think), you are basically driving down the profit per customer, and your pay per hour. In Seattle, with all the massage deals I've seen, it feels like people are now valuing massage at $30 an hour!

The only business model I've seen that makes sense, truly, is classes. My friend Dina runs an amazing Nia fitness program, and for each class, it doesn't really matter if she has 20, 25, or 30 customers. She can handle it. The costs are the same. If I were teaching a class, and the additional people didn't add to my costs or work, I would consider it.

Now, onto my 2 exceptions: the brand new coach or therapist, and the clinic/group practice.

The Brand New Coach or Therapist: In my first year, I remember when 3 clients a week was a lot! I had lots and lots of free time. The office sat unused most of the time. Time in which I earned exactly ZERO dollars an hour. If I could have had 10 clients @ $20 hour, I would have taken it! I would have taken it for the money, and the experience! So if you have an office sitting open, and you are not making money during those hours it can work for you. It can also provide PR, some SEO benefits, and possibly some long-term clients. (Dear full-fee therapists, please no *not* flame me for this suggestion, as these clients are *not* going to spend the $ for us, trust me on that. These are the people looking for the cheapest therapist they can find.)

The Clinic/Group Practice: My internship was at a wonderful group-practice that had some licensed supervisors, some interns (we were the ones who saw the sliding scale clients) and some externs. If I was running something like this, I might take a look at a coupon deal. You can negotiate fine-print in these deals, and I'd have it limited to sessions with the interns/externs - depending on the fee/pay deal you have with them. In my internship, I wanted the hours and experience (heck, I needed them!)

If you choose to do one of these deals, really focus on the fine-print! I might exclude insurance billing, limit which practitioners you can see, give it an end-date, make it subject to scheduling and availability, and you can even limit the numbers sold. If anyone does try this, please let me know about your results!

Best, Peter


Brian said...

Great post Pete. Groupon is clearly all about their own interests with zero retention rate. Clearly their business model won't last long. In fact, one of my 'groupon stores' requires 25 followers, we're at 21. Who's to say they'll even agree to run your promotion to their network if it doesn't make them the most money?

I'd like to introduce this unique website www.MeetABusiness.com, which has been in the works for about a year with 2 other business partners. We do not charge businesses an arm and a leg to offer group coupons, like all the rest of the group coupon sites do. Ours doesn't charge them anything except for the $9.95 monthly membership fee and a small extra fee if they want to purchase a deal of the day, week, or month, but the first 6 months are free, plus they get all of the other posting and searching benefits offered by the site, which the other group coupon sites don't offer, such as business resource posting & searching, jobs posting & searching, events posting & searching, networking, and blog posting. The deal of the day feature I think could help you eliminate the 'expiry' issue you had with Groupon. Plus you'll get a free long term backlink in our directory.We have over 300,000 business listings nationwide to date. Again, we are a low-cost alternative (at the moment we're a "no cost" alternative because we're free for 6 months) to all of the other group coupon sites that everyone complains are really bad for businesses, because they take so much of the pie from businesses.If you have any additional thoughts, comments or suggestions for the site, we are all ears. Would sincerely appreciate a plug from you on any of your network of sites.

Marina said...

I ran a groupon deal and had horrible luck with it. Although my website traffic boomed while they were running the promotion, only one person bought a coupon. It was pretty pathetic and a demoralizing experience. That one person never even redeemed their coupon! I wonder if the publicity actually hurt my image as well. I later got in contact with another therapist (a hypnotherapist) that had done it too and she didn't do well either. I would discourage any therapist from doing it.


www.livecounselling.ca said...

As a world leading online counselling firm we do not recommend any counselling practice, big or small, to run a groupon. The negative pr that will be received may cost your practice not only clients goodwill and reputation.

Carpe Diem Marriage Counselling

Unknown said...

What if you only offered a coupon for the initial session? That way, instead of offering a free session, you'd at least be getting paid $25 (to use your example). Then the client could decide if your fee worked for them or not once they actually come in and meet you.

I actually tried to sign up for one of those, and they weren't even accepting therapists, so maybe a moot point.

Michael DeMarco

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