Case Study: A Michigan Yoga Studio’s Tips For Managing Deal Customers
When Eric Paskel ran his first Groupon promotion in January 2011, he knew it was going to be big. What he hadn’t expected, however, was to get hit with 3,000 new clients by 11 a.m. on the day his deal premiered. In the year since then, the owner of Yoga Shelter, a chain of six yoga studios in Michigan and California, has sold approximately 15,000 daily deal coupons. But no longer with Groupon. “They have thrown me under a bus,” he says, because deals were offered at the same time from competitors down the street. Haskel says the key to managing all those new customers is staffing up for the rush, and knowing beforehand that half of all coupon buyers will never redeem their deals. Of the remaining 50%, Paskel says 10% will show up immediately and 50% will come in just before their coupons expire.
Tell me about your experience with Groupon. How many coupons have you sold so far?
In our initial Michigan run, we did 8,500. Since then, we’ve done another 6,000 at least. [We’ve sold] somewhere in the vicinity of 15,000, especially if you include everything with LivingSocial. We believe in giving it away, and I saw Groupon as a great vehicle that offers something that was a giveaway to the masses. Every other yoga and fitness studio [at the time] was interested in giving a discount, but not really giving a deal. Everybody was offering the same little deal: five classes for $25, and people were taking it to some degree because it was better than what they were getting. Then I called Groupon I said, “Listen, I’m ready to hit a homerun.” And I did. [Groupon buyers] spent $24 for 24 classes, which is nothing.
What are your goals, business wise, when it comes to the deals you’ve run?
If I had one wish, it would be for someone who hasn’t come try our place to come try our place. That’s it. It’s our job to do the rest from there. Everybody wants a new person to come into their place, and these daily deals do just that. All of our daily deals are for new students only. I’m not interested in running a deal for anybody who’s been to our studio or is currently a member. I don’t know how Groupon gets people to do it; I don’t need a second party to offer [those customers] a deal.
The most important numbers are really conversions, but to tell you the truth, Groupon isn’t looking for that person to convert. They actually want that person to leave, to go do their next Groupon.
Have you dealt with current clients who were upset that they couldn’t use your deals?
It pisses off current customers for different reasons. It’s selfish and self-centered, but they’re your customers nonetheless, so you have to be very delicate. If I were to have 300 new people a month come in all at the [same] time, it would be terrible. To have 5,000 or 6,000 new people every six months is not great. So, I’ve got to really watch how I balance them all out. I counteract the deals that I give to the new students by giving deals to existing customers so they feel like they are getting something, too. That’s psychology. It’s explaining to them that they’re also getting something because they’ve been here.
How do you manage the influx of new clients when you’re selling 6,000 coupons at a time?
We learned on our feet. The first run, the whole staff thought I was crazy. I said we were going to have 6,000 or 7,000 people come, and they all actually thought it was a bad business decision. By 11:00 in the morning [after our Groupon premiered], we had 3,000 or 4,000 people and everybody started scrambling and flipping out. What we learned, because we’ve had several other runs with Groupon and LivingSocial where we’ve done 3,000 and 2,500, is a couple of things. One, half the people will never come in at all. In any of these deals that I’ve run, half the people [who buy the coupons] will not come in. Out of the next half of the people, you get a small percentage, like 10 percent, that come in immediately. The bulk of the people, 50 percent, come in within the last few months before it expires, and 40 percent straggle in somewhere between the beginning and the end.
At the beginning, 10 percent of 4,000 is still 400 people coming through your doors pretty quickly and that’s a lot. We double down on our staff, and we make sure our existing customers are pre-registering for classes so we don’t have to deal with them when they walk through the door. We get all of our waiver forms and all of the paperwork prepared and ready to go. We know it’s coming. If someone walks through the door, we can service them immediately without having to print out a waiver and without having to give them a pencil or pen; we can keep things moving. It’s worked out fairly well. We are able to anticipate the numbers, to a degree, and we’re really conscious of that first impression.
Do you have any sense of how many daily deal customers are coming back after their deals are through?
Yes. We have a retention of 17 percent, which is really good. In all fairness, those are the numbers of people who actually showed up. Of the people who show up at all, we get 17 percent [coming back]. Now, where the numbers go up is if someone shows up multiple times. In other words, if someone actually uses their 24 classes, retention rates are more like 35 percent. That has been great for us.
Since we started all this, our biggest program has been life-training sessions. These are weeklong training courses that cost around $4,000. We must have had at least 15 Grouponers do that thus far in the last year. So, when you look at it, they spent $24 for 24 classes, which is nothing. And then all of a sudden, they’re doing a $4,000 program, which is great and that is why we have it there. To me, if I even grab one lifer, I’m thrilled. That’s what it’s really all about.
How do you track retention rates?
We use MindBody Online, and that tracks everything for us. Groupon and LivingSocial will send us iPads or something to let us know the information we are looking for, for the most part, but then Groupon disappears once we make that next sale. The most important numbers are really conversions, but to tell you the truth, Groupon isn’t looking for that person to convert. They actually want that person to leave, to go do their next Groupon. It is an interesting dynamic. Nobody thinks about that. The poor business owner, especially in a small business, doesn’t think this way. We have a different endgame.
So what are your feelings about Groupon as a company, having worked with them multiple times during the last year?
It’s interesting because we’ve had some run-ins with Groupon. Like I said, I created literally tens of thousands of deals for them, but the people I deal with in Michigan have thrown us under the bus. We had some ideas of a deal we were going to run with them, and right before they ran our deal, they ran several other deals with competitors right down the street. They did it to us twice, so I’m actually never working with Groupon in Michigan again. They’ve been trained to go out and get businesses, but they don’t have a big picture idea. I don’t want them to do another yoga Groupon in my area at certain times, especially when I know that my people are turning over at that point, because if they see another Groupon they could leave. By doing what we do, we’ve made other studios come down to our prices and give yoga away. So from the student’s perspective it’s great because they have a lot of options, but we’ve created our own competition by running deals like this.
Have you had better experiences with competing deal companies?
Yeah. We worked with LivingSocial this last time, [and they were] thrilled to have us. We set some parameters and they seemed to be more willing to work with us in a more exclusive way, and in a more individual way. We have used some of the smaller companies — there are so many of them, I don’t even remember names — because we want to explore different avenues and relationships.
The very bottom line is that anything I can do to get people through the door that connects me with more people than I had, is a good thing. And daily deal sites do that. At the end of that day, whether the conversion rate is 10%, 20%, or 50%, I’m going to have one more person today than I had yesterday, and that’s okay with me.
Click here to read more Street Fight merchant case studies.
This interview has been edited for length and clarity.