The ads can't be beat: $10 for 15 hot yoga classes; $15 for $30 worth of food and drinks; 50 percent off a day of paintballing.
Deal-of-the-day promotions on sites like Groupon and LivingSocial are selling like hotcakes, but what local businesses are really hoping is that they can turn a one-time deal-purchaser into a loyal customer.
In the last year, for example, Karen Ideker, owner of Absolutely Ballroom in Olympia, has run two campaigns with LivingSocial and started her third one last month, which will run into October.
She started using the deal-of-the-day site as a way to introduce her company to a wider mailing list, because one of her biggest challenges is getting new customers through the door.
About half of the 120 vouchers that were sold during her first two deals were redeemed, which sounds like a low return rate, but Ideker said that's not where she makes her money.
LivingSocial recommends users to reduce their prices by at least 50 percent and then the site takes a percentage of what sells, so, after slashing the cost of six weeks of classes in half, Ideker is left with just a quarter of the money she would get from a traditional, full-price paying customer.
“On the actual running of the ad, you're losing money. However, for me, it's a marketing tool for me to get people into the door,” said Ideker. “For people who have good service, that's your opportunity.”
Of the 60 newbies who actually made it into her studio, about 90 percent have signed up for at least another six weeks of class, she said.
“Where you make money is if you get new customers, and most of mine do (stay), so that's why it's effective for me,” Ideker said. “I lose very few people. Most just continue on with my classes. It goes way beyond the next six weeks.”
Keeping your deal a special
Operation Paintball in Graham has run at least five different promotions on Groupon since the site contacted the paintball company a few years ago.
The deals have helped draw in new people, but the business is having trouble turning a profit on them.
If you look at the bottom line of a Groupon, you don't get much, said co-owner Richard Christian.
“A lot of the Groupon people will stick with the Groupon. A lot of my customers that use them are repeat Groupon customers,” Christian said. “That's the hard thing to take. You know that guy is going to be back, but with a Groupon. Groupon customers are set in their ways. Groupon is out there to test the waters on a lot of different things.”
The deal alone is a wash for the company, but it has a chance to make some money when deal-of-the-day customers buy additional paint to keep playing on the day they visit.
“We've been averaging a hundred people the last few Saturdays. The majority of them are Groupon people,” he said. “With more people buying Groupon, they're going to be out there longer and buying more paint.”
The monthly Groupon check, while less significant than the revenue from regular customers during the warmer months, has helped the company survive in the winter, though, Christian said.
“There are pluses and minuses both ways, but you know that when you sell that Groupon, that person will be out,” he said. “Just getting people out to enjoy the sport is our bottom line.”
Sharon Thielen, owner of Hot Yoga at the Edge in Puyallup, has had a similar experience. In the last two years, she has run six promotions with deal-of-the-day companies, including three with LivingSocial.
Each time, about 200 vouchers are sold and three-quarters of them are redeemed, but only 20 percent of those who make it into the studio come back when their deal is used up.
“It can be a nice little check that comes in the mail, but if you take the loss in money and the traffic,” said Thielen, it's not worth it. “You lose money. It creates a lot of traffic for not that much money.”
Like Christian, she heard the promotions were a great way to reach new people, and they are, but they don't guarantee those people will return.
“People just wait around for the next deal. They never want to pay the price above what they paid,” Thielen said. “We are trying to retain members and it's just not happening.”
Another part of the problem, she said, is the type of business she's in. Because there are so many hot yoga studios in the area, people can hop from studio to studio with different deals.
“I've seen the turnover. I've seen faces come and go,” Thielen said. “The small businesses like myself that are using those types of avenues to create traffic is actually putting them out of business.”
Thielen said she will take a break from the promotions for at least six months. Afterward, she might start offering them about twice a year to stir up new business.
Mike Fosnick, general manager Lake Spanaway and Fort Steilacoom golf courses, which have seen success with their Groupon campaigns, said his deals have been limited from the get-go. The promotions are offered just once or twice a year and restricted to off-peak times as to not interfere with the courses' regulars.
“I think if you ran those promotions all the time, you're going to cannibalize your business,” Fosnick said. “We don't use it as our only source of marketing, it's just one of the various things we use to market our golf course.”
Deal-of-the-days as free advertising, ticket in the door
Fosnick has been pleasantly surprised by the success he's seen with the promotions his golf courses have run on Groupon. Not only have a considerable number of vouchers been sold, but he's seeing a number of new faces as well.
“We like to use those sites because it usually brings new customers to our business,” he said. “The Groupon customer isn't our regular player. People walking through the door with Groupon promotions aren't the same people walking through the door everyday.”
Hot Yoga Inc., which has two South Sound locations, drew in more than 3,300 customers to three of its locations in a Groupon deal that ran from November through May of this year. Thirty to 40 percent of those customers have come back after the deal ended.
“It was just a good way to network, to get outside our regular area that we had,” said Anne Laurel, instructor and manager at Hot Yoga Inc.'s Covington location.
Laurel said she's not sure if her business will run another deal-of-the-day ad. Company leaders are considering running a similar 20 for $20 promotion on their own – they already do their own 10 for $10 deal.
“Honestly, all Groupon is, is a foot in the door and you want to focus on getting them back,” she said.
Restaurants can't measure, but hope for return
Three local Melting Pot franchises, including the Tacoma one, joined the deal-of-the-day bandwagon last year.
“We did our first one last fall with LivingSocial after many years of not doing it. All of our stores at that point had their 10 year anniversary,” said Karen Lawler, director of marketing for The Melting Pot locations in Seattle, Bellevue and Tacoma.
She ran a promotion for a three-course dinner with champagne for $45 with LivingSocial, which sold record 7,000 vouchers in less than 24 hours. The deal was so successful that LivingSocial called and asked if they could offer another 3,000, which sold out within two and a half days.
About 75 percent of the 10,000 deals sold were redeemed before their promotional value expired, but Lawler doesn't know how many of those who used the deal have returned.
What she does know, though, is the three locations had a 94 percent positive guest feedback rate with the vouchers and about 90 percent said they would return.
“For so many people, The Melting Pot is thought of as a very pricey restaurant,” said Lawler, so the deal is a way to reel in new customers, as well as those who come in once or twice a year.
“I think really the gain to us is that we are providing an awareness to new guests to who we are. There are a lot of different ways that you profit or lose other than revenue for these deals,” she said. “Our logo, our name is out there. Word-of-mouth marketing is huge.”
The company ran another LivingSocial promotion earlier this month and has also done a Groupon deal, but those aren't the only marketing tools it has used.
“We're doing well without these promotions, so I don't think it's necessary. It's just a fun opportunity for guests,” Lawler said. “It's nice to do it just to kind of blanket our name out there to get it to thousands of people. It's a nice way to hit a big demographic.”
Marcia's Silver Spoon Cafe in Tacoma has been in business for 25 years, but it wasn't until three years ago that the nine-booth eatery began serving dinner.
“We have a really big breakfast crowd, but at night we'd have seven tables,” said manager Tracie Merrell. She started using LivingSocial this year to draw in diners for dinner.
In the first 10 days, more than 400 vouchers we sold, and now she's getting 12 to 20 tables a night – most with a voucher.
“We're losing money for sure, but we hope people come back and it will be worth it in the long run,” Merrell said. “They all say they'll be back. Time will tell.”