A Melbourne hairdressing salon was in dire need of a quick, low-cost marketing plan. Although the daily deals phenomenon is still new and coming of age, Jo Macdermott decided to take a punt on the online discount model as a quick way to boost sales. As she reveals here, the final results surprised even her.
Spreets, Groupon, Scoopon, Jump on It, Catch of the Day, Cudo… the list goes on and on.
All of these words are daily deal websites that have been gaining momentum since the launch of Woot in 2004. This new business model, which combines the age-old concept of coupons with the new phenomenon of online social networking, has exploded to create a unique online shopping experience.
For those of you who haven’t come across the daily deal phenomenon, I will briefly explain. Daily deal sites offer bargain (not to be repeated again) pricing on experiences, products and services for (usually) a 24-hour period. Customers buy the deal from the website direct, and depending on the terms and conditions, are then emailed a voucher to use with the business providing the service direct.
From a business owner’s perspective, participating in a deal comes at no upfront cost. The deal company takes a percentage or commission of each sale and all the business needs to do is come up with a package to sell.
There is still some uncertainty surrounding these sites and whether they are mastermind marketing or madness. The market is in a growth stage, which means there are teething problems.
For the record, I am not a fan of discounting. However, this ‘daily deal’ system is different and as a marketer I have witnessed first-hand how this promotion can have very positive outcomes for a business.
Case Study: Hairdressing Salon
Next Marketing was approached by a hairdressing salon based in Prahran, Melbourne, at the start of the 2011. After various changes within the salon, it became clear that a unique, low-cost marketing plan was needed, and quickly.
A daily deal promotion fit the bill for the following reasons:
- Instant new clients
- Immediate cash flow
- Ability to fill extra capacity
- No financial outlay required
- Having a third party run the deal ensured a degree of separation that ensured the salon was not seen as a ‘bargain bin’ salon.
After a number of scenarios were discussed, it was decided that a high-end Keratin Hair treatment worth $500 would be sold for $149.00 valid for six months.
This was decided because it is a premium product, was relatively new in the Australian market and the results last longer if additional products are used, making add-on sales possible.
When the deal was launched, the salon sent emails to a selected segment of their database to ensure current clients who weren’t prepared to pay full price for the treatment were still able to get in on the deal.
Firstly, there is no doubt that daily deal sites lure business owners with the vision of lots of new customers, no up-front costs, etc. This being the case, it can be easy to say yes to a deal price without thinking it through; i.e., are you going to make or lose money by participating in such a promotion? This is the key to the entire campaign.
Also, in ‘real life’, how is your business going to cope with so many new clients? Do you need to cap the deal? How will you fit them into your business? Do you need to hire extra staff? These are all very important considerations.
For this particular promotion, we expected to sell 80 deals but saw that number nearly double with 158 deals total being sold in the 24-hour period.
Due to the large volume of treatments, the salon was able to negotiate with the product suppliers, landing themselves a better deal for future profitability.
One in five of the clients booked in for additional services and two out of three clients bought products, resulting in over $3,000 worth of sales.
Keep your head on your shoulders and proceed with caution when it comes to daily deal sites — but when done properly, they can really deliver ‘real’ results.
Results that might even make your hair stand on its end — in a good way!
An earlier version of this article originally appeared in Marketing Magazine.
Jo Macdermott heads up Next Marketing, a Melbourne based ‘outsourced marketing department’. Jo is also Certified Practicing Marketer (CPM), which is the Australian Marketing Institutes (AMI) professional accreditation program for the Marketing Industry.
Image by Chris Willis