Expert's Opinion

Group Buying Websites

By Brenda Gallagher, National sales director and co-founder of SkinSync | September 6, 2011

How to maximize business using Groupon and Living Social.

Consider this. The average cost of a 60-minute facial in the 1980’s was in the $65 to $75 range. Over the past few decades, as the spa market became more complex and crowded, the cost of professional services and spa skincare soared.

In the 1990’s and 2000’s, beauty superstores like Sephora, and even drugstores, introduced the consumer to a plethora of lower cost, at-home skincare options that claimed to mirror the effects of professional services, yet today the cost of a spa facial generally looms in the $125 to $200 range.

Consumer patterns in spa and salon changed drastically with the change in the skincare landscape.Today’s proliferation of web-based deal sites like Spa Week, Groupon and Living Social has further fueled the fire, reducing the available pool of consumers for spas and salons, and sending owners reeling to find their footing amidst the chaos.

Understanding what was happening in the spa market was critical to our development of SkinSync.Founded on three basic principles—simplicity, affordability and results—SkinSync products deliver high performance at moderate price points, allowing our spa partners to assertively demonstrate the value of their services and regain their authority with their client base, who are now looking to the Internet for inspiration.

When history looks back at how today’s trends shaped the spa industry, web-based deal sites like Spa Week, Groupon and Living Social will play a starring role in that discussion.

These companies understand the marketplace—they present a product or service, often a spa service, at a price point that creates a sense of urgency and value for the end consumer for a finite amount of time.Brilliant.

Since their inception, deal websites like Groupon and Living Social and flash-buying sites like Gilt City, have shown exponential growth.Groupon, the top daily deal site, has grown from two million subscribers to 85 million in the past year alone. Living Social is a close second, having gone from 120,000 subscribers to 28 million. There’s also Spa Week – created by Cheryl Reid in 2004 with 25 New York area spas to “bring the spa experience to the masses”—that today boasts a membership of over 700 participating spas.

Our industry is much more familiar with and adept at participating in programs like Spa Week, but in order to be truly competitive in today’s marketplace, we must embrace and be prepared to engage in both formats.To date, many spas have yet to familiarize themselves with the brave new world of social media marketing, but engage they must, because it is the early adopters that will win the day and a new generation of loyal customers.

There are four, simple tactics for success that will maximize your return on investment when working with daily deal and flash-buying websites.These same principles can also be used with Spa Week to increase your customer base, satisfaction and frequency of their visits to your spa.

1.First things first.You have to be in it to win it.

Many spa owners are intimidated by the 50% or greater discount on goods or services required to participate with the daily deal programs plus the sponsoring website commission of up to half of the ticket value.Spa owners need to view this type of expenditure as “seed money” that will give them the opportunity to engage new customers that they can grow into loyal, regular patrons.Brands with low points of entry and preferable margins like SkinSync enable spas to participate more fully in this type of promotional activity.Remember, these flash buying sites offer incredible exposure and guaranteed foot-traffic without any initial out-of-pocket investment.Once the promotion is over, it’s up to the spa to cultivate and retain these new customers.

2.Post promotional planning is key to customer retention.

One of my client spas, the Long Island-based Cactus Group Holdings, is a great example to follow. Chairman Joe Secreti utilizes Groupon as an effective tool to drive his business. He understands that in today’s economy, spas and salons need to enhance their value proposition to attract new customers, and then provide a unique or superior customer experience to foster repeat visits and on-going loyalty. When a new customer comes to Cactus for the first time through Groupon, they are given a specialty service at an extraordinary value (i.e., a $29 massage), a $25 retail gift card and a 20% discount on all spa services for the next six months.Customers can also take advantage of a complementary promotional opportunity, like two full price massages for the price of one.By simultaneously enticing customers to return for additional services and easing them into a full-price payment structure, Cactus has enjoyed a customer retention rate of 35% post promotion.

3.Facebook will increase the number of faces you see in your spa.

Hello Gorgeous! Salons and Day Spas, a chain of New Jersey-based storefronts, doesn’t utilize websites like Groupon and Living Social—but that doesn’t mean they’ve opted out of the Internet deal arena completely.Hello Gorgeous! uses Facebook to offer special incentives to their “Likes.”Spa Director Michael McGovern says HG Salons (as they are known on Facebook) offers a 10% Off coupon to everyone who “Likes” them, along with other regular promotional activities featured on their page, to successfully attract new customers, reward best clients, encourage their relationship with Hello Gorgeous! andincrease their breadth of purchase of goods and services.

4.Always be ready to share.

According to a recent Nielsen Wire article, consumers who use deal websites to take advantage of social media marketing opportunities are 12% more likely to have multiple social networking profiles, and a whopping 33% more likely to post links, web sites, articles and videos.On-line consumers are “social” and naturally inclined to spread the word.They’ll share your content when they deem it interesting and valuable to their own network.If your business isn’t well represented on social shopping and networking sites with relevant content that’s regularly updated, you’ll miss out on benefiting from this “overflow” that leads to greater visibility and new business.

Understanding changes in consumer behavior and how and where they shop is critical to growing and sustaining your business for the long term.The spa consumers’ new demand for “value-added” is strengthened and validated by the proliferation of social media marketing initiatives and sites like Groupon, Living Social and Spa Week.It’s time for us all to get in the game.

About the Author:
Brenda Gallagher is the national sales director for Xania Labs, Mana Products' wholly-owned, direct-to-salon subsidiary that provides salons and spas with all their branded and private label beauty needs. With more than 20 years of experience in the world of professional beauty, she is a leading expert on the changing trends that drive the spa and salon industry and influence consumer behavior.

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