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Christine Fife

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Fewer Service Daily Deals

I have a bit of an obsession with Deal of the Day sites. Perhaps you’ve read my earlier: Groupon Nearly Killed My Small Business and Getting the Most from a Deal of the Day offer. When these companies really started coming out in droves last year many of the deals were service-oriented offers, i.e. hair cuts and treatments, massage and other spa services, facials and other skin care services and lots of restaurants. As a consumer–wooooo hoooo! I loved them. But the tide seems to be changing.

The economy is in the toilet. None of us have as much disposable income to slap down on personal luxuries like facials and most people are going longer without a haircut (if not flat out heading to CheapKuts at the mall!) When you’re seriously stressed and stretched to the limit a massage at 50% off is a gift from heaven.

The problem, however, is that service industries like hair salons and spas realized that they:

  1. Couldn’t handle appointments for the amount of coupons that were selling.
  2. This kind of “advertising” wasn’t free like the sales person for the deal site said it was (sure, no upfront cost, but big backend in terms of lost revenue and, in some cases, having to pay more to the service provider to do the service than they brought in from selling the deal.)
  3. The promise of developing new loyal, repeat customers was a mirage. Why go back for your next haircut when you can find another 50% deal at another great salon!

I’ve been tracking some of the more well-known deal-of-the-day sites in San Francisco for just over 3 weeks now and this is a summary of what I’m seeing in terms of deal offerings across the sites (sites include Groupon, LivingSocial, Bloomspot, Homerun and Yelp who offer weekly deals):

  • Facial services: Only 6 deals offered.
  • Hair services: Only 2 deals offered.
  • Massage services: Only 3 deals offered.
  • Other types of spa services or packages: 5 deals offered, but… they include 1 mani-pedi, 1 facial at a location outside San Francisco, 1 massage or chiropractic service at a chiropractic office and 1 offer for lash extensions (which are really expensive to begin with!)
  • Restaurants, Cafes or Bars: 10 deals offered. Restaurants can probably afford to do this type of marketing since profit margin on food and beverages can be high, tips and tax are not usually included in the deal and people are more likely to go back to an eatery or bar if they like it rather than waiting for a new deal from another establishment. Food (and for some people drinks) are a necessity!
  • Retail stores/products both on and offline: 11 deals offered. Deals range from photo printing to diet food to music downloads.
  • Activities and Classes: 23 Deals Offered! Is this a trend in daily deal offerings that’s here to stay? From the amazing to the “seriously, how many people would want that?” These deals include pro basketball tickets, bread making workshops, pistol firearms class, language classes, MacWorld conference tickets, gym memberships and drink mixing classes (sign me up!).
  • Hotels and travel packages: 10 deals offered. Unfortunately, some of the hotels are in San Francisco and I already live here. And my friends and family always want to stay with me (I couldn’t talk them into a hotel even if I paid for it!)
  • Other services and offerings: 22 deals offered. These deals just don’t fit into any category above and they are a wide range of, YAWN, interesting offers??? Carpet cleaning services, car detailing, teeth whitening treatments and tattoos (why didn’t they have this when I got my last tattoo!)

So, it’s interesting to see what businesses are now jumping into the daily-deal marketing world. The key is that they need to have high profit margins, as well as a draw for the purchaser to spend more than just the deal. Businesses only bring in about 1/4 of the retail value when they do these deals (see the break down of how it works on post Groupon Nearly Killed My Small Business), so they need to structure them in a way that is a win for them as well as the customer.

I intend to keep tallying deals from these sites to see where it goes. Be looking for an update in a couple of months!

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More Stories By Christine Fife

As I drove off to college I never would have guessed I would end up here! But it’s been a fantastic journey. My career has been richly diverse giving me an advantage over marketers who are siloed into niche positions. I strive to be a true Renaissance person—I love to learn about everything and trying new things comes naturally. My career has been no different; I’ve successfully launched enterprise software and medical device development startups, improved communications processes for the regulatory department of a major financial exchange, increased client business and product development for several international exchange program companies and founded an international educational non-profit organization. My master’s degree in Integrated Marketing from Golden Gate University gave me a broad understanding of traditional marketing best-practices, but my BA in theater gave me the skills to understand how people communicate with one another and the importance of promoting a brand in a voice that is right for the audience.