If you are a Groupon subscriber, you have probably seen great deals for discounted yoga classes, fitness camps, and a variety of other promotions. These deals are great for the customer: who does not want a $30 service for only $10? However, it is important to do some research before deciding if Groupon is the right type of promotion for your business. From knowing the pros and cons to using Groupon, to better understanding how the service works, this guide will help you navigate the Groupon process and determine if it is the right move for your yoga studio.
How Does Groupon Work?
Groupon is a well-known coupon website and app that allows consumers to try products and services for a discounted price. They offer “deal of the day” coupons based on geographic location, run social media ads, website promotions, and more. The business has over five million international subscribers and over 48 million users.
As a business owner, working with Groupon is simple. The first step is opting to “Become a Merchant” on their website, and following the steps indicated. Once your business is signed up, Groupon will promote your service across their marketing channels at no upfront cost. Instead, the company will take a cut of the proceeds from each unit sold.
Pros of Using Groupon for Your Business
There are some clear benefits to using Groupon to promote your business. Services who choose Groupon typically benefit from:
Greater visibility: With millions of users, having your business listed on Groupon will increase your company’s visibility in a number of ways. Groupon uses graphic data to promote location-based coupons through email campaigns, merchandised collections, Search Engine Optimization and marketing, display ads, social media, and more. Groupon’s integrated advertising approach means users across your city will learn about your product through multiple digital channels.
Increased foot traffic: According to ReadyCloud, Groupon users redeem nearly 550,000 coupons per day, which averages more than 20,000 per hour. No matter if a user is an extreme couponer or simply looking for new business to explore, it is hard for any consumer to deny a product offered at a significantly reduced price. According to Investopedia, retailers who offer coupons benefit from the following:
- Coupons bring new users to your business by reducing barrier to entry. For example, If someone is not sure they will like a new fitness class, they are more likely to pay $10 to try it instead of $30.
- Discounts encourage previous customers who have not recently visited your store to return. They remind people of your business and incentivize customers to buy goods and services for a reduced price.
- Promotions and deals are a great tool for social media and can help spread the word about your studio in the digital space
Profits from incremental revenue: Increasing your incremental revenue essentially means getting more revenue without increasing the fixed cost of your service. For example, say a yoga studio has $3,000 of fixed operating costs per month including rent, teachers’ salaries, utilities, and other recurring costs. If that studio charges $30 per class but is not filling every class, offering discounted programs will increase incremental revenue because they help you earn profit at no additional expense. Essentially, this means if all other factors are accounted for, it is better to get $10 for a class rather than $30, if that space would have otherwise been empty.
Customers buy more than just the promoted product: Most people have gone to the grocery store and come home with a few items that were not originally on their grocery lists. This common occurrence is another reason Groupons can be beneficial. According to ReadyCloud, 50 percent of all Groupon purchasers buy more than the advertised deal. For example, if customers come to your studio for a Fit Flow Yoga HIIT Workout that was available through Groupon, and decide to sign up for your Pure Flexibility class (a non-Groupon offer) during their visit, that person is now purchasing more of your product than the original promotion. Though Groupon does not specifically promote buying more than just the discounted item or service, the offer is getting more customers in your door and giving those customers the chance to see what your studio has to offer!
Cons of Using Groupon for a Yoga Studio
While Groupon can be beneficial to yoga studios, there are also some cons to using the service. Before you sign your studio up for Groupon, it is important to consider the following:
Proceeds split with Groupon may mean lost revenue: Groupon’s terms of service say they take a percentage of your proceeds as “compensation to Groupon for marketing, promoting, and advertising the Merchant Offering and distributing the Vouchers on behalf of Merchant.” Though they do not clearly state the exact amount in their terms of service, most accounts state about 50 percent of the proceeds go to Groupon. That means if you are offering yoga classes at an already discounted rate, say $10 instead of $30, and then groupon takes half of that, your profit margin is only about $5 per Groupon sold, or about 17 percent of your service’s usual value.
Offering discounted products can devalue your brand: If your customers are willing to pay $30 for a yoga class, but other participants in the class are only paying $10, is the service still worth $30 to your original studio-goers? When you drop your price, you are lowering the perceived value of your service: those who originally paid $30 for a class may now believe that the same class is only worth $10. The lowered value can mean users of your service who are pay $30 per class may not want to continue to pay full price if they know other people in the room are only paying $10 for the same experience.
Groupon attracts bargain seekers, not always repeat customers: Those who subscribe to coupon services like Groupon are looking for great deals and discounted prices. This means that oftentimes those who buy Groupons are interested in your service because of the discounted price, and will not return to pay full price for the same service later on. ReadyCloud says only 31 percent of Groupon purchasers become repeat customers, and a 2011 survey by Business Insider found “only a handful of return customers” after a business’s Groupon promotion expired.
Groupon Can Be Most Beneficial When…
If you would like to try Groupon for your yoga studio, it will be most beneficial under the following circumstances:
You have spaces to fill in a class: If the classes you offer at a certain time of day typically have empty spaces, if you have sessions that often drop in attendance around certain times of year, or another predictable decrease in attendance, those typically under-attended classes can be good places to implement a Groupon. Because Groupon does not charge an upfront fee, using the service to promote unfilled space can be beneficial: If it will not cost you any additional time or resources to add people to classes you are already offering, promoting classes that would have otherwise had low attendance will enable you to benefit from incremental cost.
You are hoping to get rid of inventory: If your studio sells physical products such as yoga mats, water bottles, or other collateral that you are trying to get rid of, grouponing can be a great way to quickly get rid of the excess inventory.
Your ratio of cost-to-benefit will benefit your bottom line: Groupons can be a shortcut to immediate revenue. However, these sorts of deals do not always turn out to be beneficial for your business in the long run. The New York Times offers a holistic guide to calculating the cost and benefit of using Groupon, where you can enter your company’s information to get an better idea if this type of promotion will be beneficial for your business.
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