We occasionally get calls asking if we’ll match someone’s Groupon offer, or will we run a Groupon offer in the near future. Before I answer, lets look at how these daily deals work:
- A business signs up for a special for a specific service or product at a specific price, lets say $300 for full legs for 5 treatments.
- So doing the math you’d think the business receives in essence $60 for each treatment.
- Groupon and others typically take 40-50% as their commission!
- So what the business receives is say $36 per treatment (assuming 40% comission)
Many think a business shouldn’t make a profit, but if a business doesn’t make a profit, then why stay in business. The owners don’t do it for love. So lets look at the costs to do a single treatment of full legs:
- Labor – Full legs should take about 90 to 120 minutes. So if a technician makes $15/hour the full cost for taxes, insurance, etc is over $20/hour. So labor is for two hours is $40. (It takes time between clients to clean the equipment, the bed, end of day wash the sheets and cover ups, etc.
- Cost of the equipment – Good quality hair removal lasers cost around $100,000 each. with lease, insurance, maintenance it costs over $100/day just for the laser. So for a 2 hour treatment that is $25 (assuming an 8 hour work day)
- Supplies – Depending on the laser it will require cryogen, ultrasound gel, lenses, etc. For a 2 hour treatment the supplies cost about $10.
- Rent, business insurance, utilities, advertising, website, cleaning, etc. these can vary widely from business to business, but rent for an office is probably $3-5,000 per month and up. Lasers use a lot of electricity, So hard to estimate this so I’ll ignore it for this discussion, but monthly overhead could easily be $8-12,000/month or more.
So adding those up it would cost $75 not including rent, insurance, or any of the overhead costs.
So how can a business make any money offering a service for $36 that costs $75 to deliver? They’d quickly go out of business. Lets look at a few ways:
- Advertising – Many service companies offer Groupons at greatly discounted prices with hope was that it would bring them new long term customers. What many have found though is that a person comes in for a Groupon for say Underarms, and they hope they’ll become a regular customer for other areas like bikini, legs, etc. What they’ve found though is that they come in for the Groupon and never come back unless there is another money losing special
- Cut Costs – So how can they cut costs by more than half? The only way is to do less work and spend less time. If what should take 2 hours for say full legs can be done in 30 minutes, then that cuts the cost by almost 75%. So how can that be done? When an area is properly treated each laser pulse should overlap the neighboring pulses like the Olympic rings. Typical treatment spot sizes are between a dime and a bit smaller than a quarter. Spacing like this will typically take 6-7 treatments to properly clear the area and leave it hair free. But to cut time they’ll leave untreated areas of skin between each shot. So rather than looking like the Olympic rings it will look like a polka dot, with lots of space between the dots. So you’ll get in and out fast, but at the end of the treatment package (5 or 6 treatments) you’ll still have hair, a little less, but it won’t all be gone.
When you’re considering a Groupon type daily deal call and ask how long the specific treatment will take and how many pulses. Most lasers can fire at a rate of one pulse every 1-2 seconds, then add time for repositioning, rolling over applying and removing ultrasound gell, etc.
So to answer the original question, no we can’t afford to match Groupon, or other types of daily deal, prices. Our goal is to provide our clients with the best possible treatment at a reasonable price. We’ve done all we can to keep our overhead low, but we’d go out of business if we provided quality services for less than half of what it costs.