Being in a very competitive field, we’re constantly looking for ways to better promote our services, increase website exposure and do some great work for our customers along the way.
With that in mind we took a long hard look at the newest craze – ‘Deal of the Day’ promotions. For those that don’t know, ‘Deal of the Day’ promotions are vouchers sold online for goods and services. Generally, these are offered from local businesses. Restaurants, fitness clubs, auto shops and hotels are some of the main stays you’ll find virtually everyday. The consumer has a limited window in which to purchase the coupon (usually 1 – 3 days) but will usually have anywhere from six months to a year to redeem it.
The arrangement between the promotional company (Groupon and Living Social being the biggest) and the service provider is a revenue share based on each voucher sold. Typically, the revenue share ranges from 50/50 – 60/40. However, this is based on the service provider offering a promotion that is at least 50% off it’s normal price.
Here’s an example: You’re a mechanic that normally offers an oil change for $29.95. With Groupon or Living Social you’ll be expected to offer your oil change for $14.95 or better. You’re then paid an average of 50% for all vouchers sold which will render the auto shop an average of $7.47 per oil change.
For many businesses this may seem like a great idea. It gives you the opportunity to bring in a lot of new customers and there is no out of pocket expense. However, it can be very costly if you don’t plan your promotion properly. In fact, running ‘too good’ of a deal can be detrimental to both your businesses reputation and balance sheet.
Let’s look at the oil change promotion again. The shops overall gross profit would be $7.47 per job. Will there be any money made from this? Removing fixed costs expenses like rent, insurance and utilities you’re still left with two big issues: labor and product cost. Some of these deals sell in the hundreds or even thousands.
No, you will not make any money with the oil change. Now what? Do you offer additional services like an air filter replacement or perhaps a fluid change?
Sure. Offer away. But there is a fine line between offering and shoving something down a customers throat.
There is a bright side though. Most people will use your service again if you do a great job. An oil change is a common thing. So are other thing like eating out, going to the gym, etc. In the long run, this promotion just might pay off for you.
I just don’t think it’s the same in the carpet business.
In the world of carpet cleaning there is a lot in the way of variable costs. Gas, chemicals, labor and time are the biggest unknowns that come with each and every job.
Let’s also not forget that most people have their carpet cleaned once a year – at best. Yes, I do the best job possible, so much so that they may not need me for a couple of years!
Most Groupon carpet cleaning promotions are around $49.00 for about 1,000 square feet of cleaning.
Sorry everyone, but this is impossible to offer on any scale and expect to make a profit. The service provider will be forced to either ‘push’ additional services, cut corners by not offering all the services and products needed to do the job right (soap and pre vacuuming come to mind).
It’s highly likely that everyone will suffer.
I could be wrong. Wouldn’t be the first time. I’d love to hear from other cleaners and especially consumers.
Post your comments and share your thoughts.
