Like many of you, I get a daily Groupon e-mail and will often take a look and see what special deal is being offered. I admit to being intrigued by the upcoming Tomato Battle taking place in my town next weekend (modeled after the annual rite in Bunyol, Spain), but I’ll leave it up to a few thousand others to enjoy that event.
While I have serious reservations about the longevity of the business model (which were confirmed by Groupon’s recent financial reporting), this type of offering has struck a nerve with deal-seeking consumers whose spending patterns have been permanently altered by the economic battering of the past few years. For consumers, Groupon (and its cousins on Living Social, Schwaggle and the hundreds of other deal sites) can be an enticing way to try or buy something for the first time.
For providers – and I am speaking directly to those of you who market your services – Groupon can be a risky proposition for the business. There are countless examples in the media of the restaurant or bakery being overwhelmed by Groupon redeemers. They simply didn’t have or plan capacity to meet demand. In some ways, that’s a high quality problem for a business owner. And for providers of annuity-type, non-surgical medical services, such as facial aesthetics (eg, Botox, teeth whitening), enticing a first-timer with a good deal makes sense. What I am concerned for are those services that are in the “once-in-a-lifetime” category, such as LASIK.
Grouponing LASIK is a bad idea for one simple reason: No opportunity for repeat business! You’ve given away the farm to someone who will only pay you one time. And if it’s word-of-mouth you are hoping for, you need to recognize that what you are doing is stimulating consumers to talk about the great deal they got on LASIK instead of talking about the miraculous improvement in their vision.
I could dive right in to economic principles to support my assertion, but choose to limit them to their punch lines:
Don’t treat LASIK like a commoditized good. There’s no “supply” of LASIK that risks becoming obsolete on the shelf (such as last season’s trendy sweater) or spoiled (like those gourmet cupcakes).
Discounts don’t work to increase demand for LASIK. Historical trends over 15 years demonstrate an inelasticity of demand, as decreasing prices have correlated with decreasing demand for the procedure.
For a “one time” procedure, all a discount does is lure a person who has been actively considering the procedure; he or she would eventually have a sufficient trigger and pay the going rate. The LASIK example illustrates how providers mistakenly believe they can attract the much larger market of spectacle and contact lens wearers; history has shown they aren’t motivated by low price.
My view is that demand for LASIK is going to improve steadily over the next few years. See my commentary “Is LASIK Dead?” to learn more. (Thank You Note: I’m gratified to see this was the most widely read article in the August 2011 issue of Cataract and Refractive Surgery Today).
Doing a few hundred extra LASIK cases at half the price does little to boost the bottom line. But it does a lot of damage to the long-term pricing integrity of that provider and continues to foster the myth that LASIK is a commodity and can be had for cheap.
In short, leave the grouponing to repeat-visit offerings where the goal is to stimulate a trial or sample purchase, and don’t undermine your long-term brand or market position by using groupon as a promotional tactic. The risk of backfire is much higher than any possible short-term reward.