Roger was a quiet bright kid who didn’t ask much. When he was 14, he begged my mom to buy him a wood lathe. When my kid brother tore the wrapping off the long wood box on Christmas Eve, my mother beamed. “Now you can make us new kitchen cabinets!” A lathe is a great tool if you want to turn out chair legs, salt and pepper shakers or Louisville Sluggers. It’s not the tool of choice for jasmin live cabinets. For me, the lathe was an unforgettable lesson in expectation, capacity and function.
This spring, expecting a bargain, I carried a $60 Groupon into a Janet Rufin’s Salon in New York City. The function of this upscale Gramercy salon? To turn a profit. The capacity of the Groupon as a useful tool? Uncertain. In case you don’t live in one of 40 U.S. cities where Groupons are offered, here’s a quick explanation: Groupons (short for Group Coupons) are localized coupons e-mailed to your inbox every day. Groupon began in Chicago and has been growing like a virus–7,000 employees and counting. Though Groupon has yet to turn a profit, they recently turned down an impressive buy-out offer from Google. They will be launching an IPO “very soon” according to the Wall Street Journal.
Groupons seem perfect for impatient value-driven times. Signup is free. The pictures are enticing, the descriptions kitschy and pithy–and the deals are unbeatable. For a value conscious consumer, Groupon hits the spot. Deals require minimum number of participants to activate the jasminelive discount and sometimes are limited to a certain number of buyers. There is a visible stopwatch counting down, second-by-second, on your computer screen. It’s the capitalist three-step: pant, rant and buy.
Hungry small business owners may be predisposed to participate. We want to believe we’re special. Once someone tastes our gelato or gets our haircut, they’ll break the doors down. Groupon’s sales team needs to hype the steep discount to potential business clients while they gloss over the 50/50 split of what little is left. Groupons are often marketed for 50 cents on the dollar, which means the business takes 25 cents on their usual $1 product or service. Groupon gets the other quarter. This protocol differs from ‘advertising’, where a business can spend thousands with no guarantee of increased traffic. There is less resistance because there is no significant up-front cost to the seller. And unlike traditional advertising, the better the response, the more the ad agency (Groupon) collects: they have a stake in your promotion.
Business owners may be buying the wrong client, though. They may buy the promotion looking for marlin and wind up with catfish. Folks who buy a Groupon promotion are more likely to be catfish–customers who suck up value and swim away, leaving the business with a loss. I never intend to pay $120 for a Big City haircut. I just wait in the depths for another salon deal to swim into my inbox. When I scheduled my Groupon haircut I expected to be cast off where the bottom feeders belong: to the most junior stylist. Instead, I wound up at Janet Rufin’s Salon in the owner’s chair.
I asked Rufin how the Groupon was going, and was surprised to hear her enthusiasm. This was the second Groupon promotion for Janet Rufin’s Salon. The first Groupon didn’t work out as well as she had hoped. Many business owners would have shrugged it off. Janet Rufin analyzed the deal and decided to give it another try. First, her staff was overwhelmed with the initial Groupon. With only a single offered option, that particular hair service was overbooked. Offering more options meant more scheduling flexibility, less harried staff.
Rufin watched her stylists work under pressure during the first go-round. By the time the second Groupon came out, she had let one stylist go, and coached the rest to treat Groupon customers with kid gloves. Rufin instructed stylists to sniff out the best potential clients and offer them another significant coupon for their next visit. Bringing new clients in is costly; Rufin wanted to keep as many of these newcomers as possible. Last time I spoke with her, Janet Rufin’s Gramercy salon had retained at least 1/3 of the Groupon customers, and the curve was still aiming up.
For Janet Rufin’s Salon, Groupon was a useful tool. She had reasonable expectations, she adjusted capacity and had an understanding of the function of this promotion. My second Groupon? A different story. The receptionist on the phone was rushed, her voice flat. I asked her if I had to make any special preparations for my visit.
“Before you come in for your laser hair removal, do not touch the hair for three weeks.”
I complained. “You’re kidding.” Silence.
“How long do the hairs have to be for this to work?” I asked.
“Just don’t clip them for three days,” she sighed.
This was weird. First she said three weeks; within seconds it was three days. When I arrived, the receptionist barely looked up.
“Groupon?” She laid her hand on the Formica countertop. I half expected her to yell, “Next!”
The technician who led me to a treatment room gave me yet another answer to my pre-treatment question. “Oh, you don’t have to grow hair out for laser removal,” she said calmly as she slathered on a layer of cold goo. That was a surprise. Then came the attack. Well, that’s a little harsh, but let me tell you, this live jasmin service comes with its own painful disincentive. To her credit, the technician (I can’t bring myself to call her a ‘stylist’) did give me a moment to steel my resolve.
Less than ten minutes later, she was done. “That’s it. Don’t pluck. Wait for the little hairs to fall out.” I was glad to leave. I felt like I’d been on an invisible conveyor belt in a poultry plucking facility. Did this business realize too late that they had made a horrible mistake? Were they resigned to getting Groupon customers in and out as quickly as possible? I left a phone message with the M.D. who runs this business. My call was never returned. Honestly, I have no idea if this board-certified doctor thought the Groupon was a success.
The staff was poorly prepared, abrupt and ill informed. Though the technician was competent, she wanted to get rid of me without bothering to cross-sell or promote their other dermatological services. This doc did one thing right. The Groupon was good for three visits. Even if the receptionist is curt and the service is perfunctory, after three visits a client may be habituated enough to come back for more.
I can’t help but think about Roger and the lathe. I respect Janet Rufin for seeing through the first few wobbly turns of the idea and ultimately harnessing the power of the Groupon tool…but I’m still not paying $120 for a haircut. The dermatologist, I suspect, is still wondering why he wasted money on that darn Groupon.