Case Study: Struggling to Turn Deal Chasers Into Repeat Clients
When it comes to running daily deal promotions, Maria Camacho is far from a newbie. In the past few years, the owner of The Little Yoga Studio in San Diego, California, has run deals with a handful of different group coupon companies. She says the low-paying group coupons are worth it to her as long as two or three of every 100 daily deal customers become repeat clients.
You ran a promotion with Yelp Deals recently. What other daily deal companies have you tried in the past?
I did Groupon when they started up in San Diego and I’ve done LivingSocial. We’ve done kgbdeals. We also participated in a couple more deals. Fun Daily Deal is one. You know, ever since that craze started, we have been getting maybe two or three phone calls a week from different places that are doing the same thing. It’s profitable, and a lot of businesses are wanting to bank on that.
Did you notice any difference between them, from the merchant’s point of view?
Yes, absolutely. The first one we worked with was Groupon. They had a launch-time deal, so they called us to make a deal and I didn’t have any idea what to expect. The experience overall was good. They were professional and they had experience. So, when they opened the market up with our yoga studio in San Diego, that was good. I don’t know if they are still around, but the Bargain Guys and Fun Daily Deal; I don’t know if you’re familiar with those. We tried them, and it wasn’t very good. I mean, I didn’t know any better. Now I am more selective with who I choose to work with.
We’ve been lucky because [daily deal companies] have come to us and asked us to participate. I see from other studios that I know that sometimes it takes a long time for [the companies] to call them back. But we’ve just been invited to participate. Some have done a lot better than others, but overall I would say Groupon and Yelp have been really professional. LivingSocial, also — they’re great.
I saw that you offer online scheduling at your studio. Has that made it easier to handle the influx of new clients?
Sometimes yes, sometimes no. We’ve gotten better at being prepared for it. So, now on my voicemail I tell people, “If you’re calling because of an online coupon, this is what you need to do,” because in the beginning we spent a lot of time on the phone with people after the deal went live. People are like, “What do I do? When can I come? Do I just show up? What do I do with my coupon?” And they don’t know what to do. We’ve gotten better at making it easy for customers to come in with a coupon – or sometimes we let them show us their coupon number on their iPhone or BlackBerry. We’ve adapted as well to make it easier for people to come in. For our regular customers, sometimes it’s not so great because classes get more packed. Lately, we’ve found a nice rhythm and not everyone has been coming at the same time, because coupons have a year expiration date, depending on who you’re working with.
How about customer retention? Do people tend to come back after their coupons have been redeemed?
I think it’s a good step to get people in the door, but otherwise I wouldn’t have the budget to lend my studio to thousands of people the way we do with the coupons. But the retention, I wouldn’t say it’s that high. A lot of people are looking for deals, so they will hop around from studio to studio. Some people show up to us and they’re like, “Oh, let me find my deal.” Then they scrape through the 10 deals they are carrying in their wallet. So, right now people are looking for deals.
It’s also helped me develop more of a strategy for my business. So instead of having to share 50/50 profit with Yelp or whomever, I work on my own deals and people respond well to those because they want to save money. The problem is, I can’t pay all my teachers for all these people that are paying $2 or $3 per class. You have to share the profit with [the daily deal companies], on top of the 50 percent or more discount you have to sell your product for.
So how have you been able to combat that problem?
Well, I do my own promotions and I do my best to make sure people are happy. I do follow up with people – the system I have, which is Mindbody, helps me track down people. So, sometimes I’ll up-sell. I’ll say, “Okay, you did your Yelp Deal. Now come back for this deal.” So, I do that kind of thing.
You’re in a unique position, having run a handful of deals with different companies. What have you learned about the process that other merchants could benefit from knowing?
Well, it is a great way to bring people in the door. It is not the best way to retain customers. But otherwise, you wouldn’t be able to reach out to that many people at once. For a small business like mine, I don’t have spending money for advertising. I don’t have a marketing budget. So, these [companies] are helping me get people in the door. That way, it’s up to me to retain them. The people who are just looking for deals aren’t going to come back, but if I get to keep two or three people out of the hundred that come, and they become my customers, then it’s worth it for me. They will say, “Oh, we loved the class,” and they will recommend it to other people. These people know who I am, they know where we are, and word of mouth is a really strong tool for a small business like mine.
This interview has been edited for length and clarity.