Do Daily-Deal Sites Like Groupon Work for Local Businesses?
LivingSocial, Amazon Local, and small companies
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Other Westchester businesses have not fared as well. Nicole Sanders, owner of Ladimax Sports and Fitness, has used Groupon once since moving her business to a larger space in Thornwood in March 2013. Though 350 people purchased the offers and roughly 280 have redeemed them so far, being locked into offering a discounted three-, six-, or 12-month membership hasn’t been great for Sanders’ business. A customer purchasing a year’s membership at the $200 rate, for instance, nets Ladimax just $100—and no guarantee that they will re-up at the full price after their first 12 months. “The value of my gym and my experience as a trainer goes way beyond what I can offer through Groupon,” Sanders says. “My business doesn’t really fit the daily-deal model, so I don’t plan on doing it again.”
Fitting the model is easier for some businesses than others, explains Larry Chiagouris, professor of marketing at Pace University’s Lubin School of Business. Daily deals are more profitable for companies offering services—such as a massage, a dental exam, or a house-cleaning session—than products, he says.
“Companies offering services are only sacrificing their time, not the additional expense of inventory or ingredients or other goods associated with delivering a product,” Chiagouris explains.
This may explain Elite Dental Studio’s positive experience using LivingSocial and Groupon to offer X-rays, exams, cleanings, and teeth-whitening services. “These deals were a great opportunity to meet new clients and expose them to what we have to offer, which we feel is a different experience from most dental offices,” says Lucy Khorram, office manager for the Yorktown Heights practice.
Some of the Groupon and LivingSocial customers who came to Elite admitted to using these kinds of specials every six months for dental cleanings—possibly indicating that they may not become loyal patients. “But even if these patients do not return, they may refer a friend based on their positive experience,” Khorram notes.