Losing Control of Customer Mix Through Group Discounting

From the Book:  To Group Coupon Or Not

In one of the small business success stories featured in GroupOn website, Director of Melt Spa and Salon in Boston tells us about her success from running GroupOn promotion.

Her original expectation was 200 people but the promotion brought in 1400.

If you skip ahead in the video, at one point she answers the question,

“What were GroupOn customers like?”

The Spa Director says,

“We have seen a big range of customers come in, from students to business people to grandmas”

When you open a premium Spa and Salon or any similar business that offers premium product at premium prices, your strategy should be to target specific segment of customers who are similar in their profiles. Most importantly you want a customer mix that hires your product for the same set of reasons.

A customer buying  $125 haircut is hiring the product not just for what the product is but for a basket of reasons. There are utilitarian reasons and then there are other (hedonistic) reasons like brand, experience, ambience, social status and most importantly other customers.

Perception of profiles of other customers is a key decision factor because it tells them about their own profile. We all tend to look for social conformity in our choices.

If a  GroupOn promotion brings in 1400 new customers, from students to business people to grandmas who came in only because of the steep discount, what message will it send to your core customers?

Will the big change in customer mix negate a key reason your pre-GroupOn customers hired your product for?

I have nothing against grandmas; the point is your loyal customers may take away a different message about the product when they see a sudden change in customer mix.

Acquiring 1400 new customers who paid $50 for $125 services is not all bad  but you lose control of your customer mix.

Instead of targeting all its 25 million email subscribers, can a Group Coupon site enable you to specify the exact customer profile that you want to reach?