Written by Lori Shecter

Living Social

Do "deal sites" such as LivingSocial and Groupon help you grow your business?  We talked to several studios and here's what we found out.

First, I would be lax if I didn't reveal the fact that both LivingSocial and Groupon are suffering financially.  In November 2012, Groupon announced the layoff of 400 employees.  If you want to read the whole article it is HERE.   This article will focus on whether either service is right for you.

First, neither Groupon nor LivingSocial should as a panacea in and of themselves.  That means, that both of these strategies must be part of a larger, long term goal-- if you are looking for a quick fix, they are not the solution.  (But then again, if anything were a quick fix, we'd all be rich by now, right?)  Used in conjunction with a long term growth strategy, both deal sites can work, but beware of some caveats.

Erica Riles, from Joyful Music and Dance did experience early success with Groupon.  The first time she used it was for a summer camp, where JMD offered a one week summer camp for $50.  The response was high and the school got 50 signups-- great for the summer, and great for that one week.  However, JMD didn't seem to receive the long term benefits of students returning. The parents who redeemed the coupons were just looking for a short term solution for a week in the summer. After using Groupon one more time, results were not as good, so Groupon REFUSED to work with them again!  That is the chance that you take when working with deal sites...they can refuse you, because they are purchasing the "discount" from you and must be able to resell them.  If you are not a "good bet" then they will refuse to work with you again.  LivingSocial proved to be a better experience for this studio and the first time JMD used LivingSocial they got a good return as well.  Second time around?  Not so good.

Another studio in Florida also used LivingSocial. For this studio, deal sites were only part of a long term, integrated strategy.  Here were some pointers that seemed to lend to the successful use of LivingSocial-- but mainly sampling classes are the key goals for deal sites.  The "discount" is part of the overall marketing budget, and so, offering the class at a loss is a business and advertising expense, not really a loss.

  1. Deals are only run one time per year.  Deals need to be strategic and not seasonal.  So, for example, one week of an after school program might reach parents who NEED a long term solution-- not a one week summertime respite.  Kids sample the program and like it, thus parents might be more inclined to sign up for a full time program.
  2. Deals are strategically determined based on the type of deal it is and the timing of such a deal.
  3. The long term strategy is not for quick growth, but rather to get sampling and to provide each person redeeming the "coupon" with great customer serices.
  4. It is critical to establish a great relationship with your sales rep.  This opinion was also voiced by Joyful Music and Dance.  Unfortunately, their sales rep left the company and it was difficult to establish the same relationship with a new rep.
  5. This studio only ran deals once per year in order not to dilute the effect of having a deal.
  6. All deals must be able to be redeemed and properly processed.  This point is clearly noted from this dance studio in San Francisco. 

After selling nearly 700 vouchers for fire-dancing classes, Isa Isaacs of Temple of Poi in San Francisco knows the pattern: most customers wait until a week or two before the voucher expires to redeem it. "I cap my classes at eight people -- what do you do when all the spots have already been filled?" says Isaacs, who decided to use the expiration date as the last date to schedule instead of attend. Even so, people who had trouble redeeming slammed her with negative Yelp reviews. YIKES!

Ok, confused?  So am I!  It seems that deal sites CAN WORK, however, you really need to speak to your sales rep, and be very careful about READING THE FINE PRINT and making sure that you can deliver all the deals that you promise.  Additionally, they need to be part of an integrated solution, not a one-off test.

Use with caution. By all means, TRY IT, but PLAN IN ADVANCE.  Sometimes, especially with newcomers, it can take four months to get your deal on the site.  

A safer and more controlled bet might be trying MEET UP for a trial:  even if it's for a KID'S SATURDAY class.  Or, create a quick ad on FACEBOOK targeted only toward your zip code to let people know about trial classes.

Have any thoughts, suggestions or experiences using a deal site?  Let us know!