Making Money with Groupon

Not too many years ago, may be five or six years now, I remember photographer Chris Becker (the Becker) talking about all the benefits of blogging. I remember thinking, hmmm… sounds interesting but more like a fringe thing to me. Well, within a year everyone had a blog and anyone who didn’t was missing out.

These days, I get the same feeling about Groupon. I suspect that the current trickle of photographers who are using it may soon become a flood. But as with any new technology, it’s easy to make painful and expensive mistakes. For this Business Coach, I’m drawing on the experience of those who’ve been there to hopefully save you hassle and help put money in your pocket.

For those not familiar with Groupon, it’s a website where businesses offer a screaming deal to local customers for a short period of time. For example, a fancy restaurant may offer a $100 dinner for $30. Although the restaurant may lose money with each customer, because many Groupon deals are often purchased by 1,000 customers or more, it’s a great marketing opportunity for the business.

This marketing does not come cheap; Groupon takes half of the money collected and then disburses the business’s share over a period of a couple of months. Cash flow can take a hit as you ramp up to meet demand without having the cash in hand to pay for it. Not to mention the fact that you may be losing money with each purchase.

Of course, the hope is that the customers who do come in will spend much more than the original coupon. From all reports, many do just that. However, depending on how you structure your deal, there’s a good chance that you’ll get no additional sales, you’ll attract the wrong clients, and you’ll work your business into the grave. So tread carefully!

Now that we’ve got the basics out of the way, lets talk about making Groupon work for you. Here’s John Mireles’ Rules for Groupon Success:

1. Use Groupon to build your portrait business, not for weddings.
Where portraits may be booked on any day of the year, wedding dates are more limited. Plus, weddings are a lot more time and money. Booking 100 weddings at half-price is a sure way to go broke.

2. More is not always better.
It’s easy to run a sale so that you book many hundreds of clients. I saw one where a photographer booked over 900! Most of those clients will never come back nor spend a dime more. I’d much rather book 50 qualified clients than 500 bottom of the barrel bargain seekers.

Put a reasonable cap on the limit of customers you’ll accept. Yeah, the income from 1,000 sessions may look good, but it could well destroy you too.

3. Create projections in a spreadsheet before you start.
Run the numbers of what it’s going to cost to deal with your anticipated number of bookings. Look at every little expense while at the same time being realistic with your expected income from Groupon and the post-sales afterward.

It’s far too easy to get excited about the large payout you’ll get from selling hundreds of sessions without considering all the expenses that go along with. You’ll be sorely disappointed to do all the work of hundreds of sessions only to realize you made little more than the minimum wage. A little planning can help you to profitably structure your deal. Here’s a couple of projections created in Excel that project both income and income verses expense. In my spreadsheet, the pages are linked so that I can change my assumptions around to see how different scenarios will impact the bottom line. The first spreadsheet makes assumptions about the number and amount of post-shoot sales to expect.

Post-Shoot Sales Assumptions

This spreadsheet takes the post-shoot sales assumptions of the previous sheet and combines it with income and expense estimates for the entire Groupon sale to come up with an expected bottom line profit. Note that the final take here is about $25,000. That may sound like a lot, but we’re talking 450 sessions and a year’s worth of work – that’s about slightly less than double the minimum wage (with triple the hassle).

Groupon Sales Projections

4. Plan on post-shoot sales sessions if you want your offer to be profitable.
If you’re not upselling after the session, you’re likely to lose serious money. I don’t recommend online ordering either since that will yield much lower results. The best way to generate sales is with an in-person sales session. That takes time however – often more than the original session so plan accordingly.

If you offer a disk, you lose the opportunity for the upsell. Groupon will likely push you to include digital files, however it’s your business that will take the loss; they make their money either way.

6. Set up your offer to upsell from the very beginning.
If you include multiple images and prints in your offer, you’ve taken away any motivation for additional purchases. Don’t try and change the deal afterward either – that’s not fair to the client and will just create headaches all the way around. Plan it right from the beginning.

7. Consider all of your expenses.
If you do go out and book 300 plus sessions, you’re going to need to hire someone to help with the bookings, customer service, photography, post-production, sales and accounting. You may require two or even more additional staff to see you through. Customer service alone – from scheduling shoots to booking sales appointments to coordinating orders to taking care of complaints – will likely require an additional staff person. Be sure to budget for this in your plans.

8. Don’t worry about giving the lowest price.
There’s a huge difference between a $25 client and an $100 client. $25 is throwaway money to most folks. $100 is an investment. You want those clients who are willing to make an investment in your work. As I alluded to before, I’d much prefer a small number of $100 clients to hundreds of $25 clients. Think quality not quantity.

Case in point, San Francisco area photographer Monica Michelle used a service similar to Groupon to market to clients in her local area – a high net worth suburb where houses start north of $1,000,000. To keep the quality of clients high, she offered $600 in services for $150 – and the gambit paid off. Nearly all of her clients made significant purchases – up to $6,000 – and the client base she developed is exactly as she had hoped (wealthy).

9. Don’t think you can handle big numbers of clients all alone.
You may be able to for a little while. Then you will either start dropping balls or go crazy. Either have a trained support staff or be prepared to outsource as much as you can. Monica Michelle, who works alone, ended up with 53 chaotic, though manageable buys. As she puts it, “200 clients would have killed me.”

10. Place a time limit within which the deal must be redeemed.
The last thing you want is a constant trickle of cheap customers coming in a year or more after you’ve offered the deal. Specify that the purchase amount becomes a credit towards a shoot after a certain date. They can still save money, but they lose out on the deal. One year after doing some big Groupon deal, you may well be sick and tired of anything or anyone having to do with it.

11. Have the infrastructure in place before you start.
Figure out how you’re going to manage clients (through a database like ShootQ), perform the photography, handle the sales sessions etc BEFORE you start. Working through the potentially massive increase in volume is going to be challenging enough. Trying to figure out how to do it while you’re in the middle of it is like trying to learn how to paddle in the middle of the rapids.

12. Keep it all in-studio.
If you are going to go with big numbers, stick to in-studio shoots with sales sessions immediately following the shoot if possible. This is how the high-volume studios like Sears and Picture People work – not most boutique studios. But if you’re going to enter the high-volume world with hundreds of Groupon bookings, something’s gotta give.

13. Plan for what comes after.
If you do decide to book 500 portrait sessions and you end up with extra staff and overhead, what are you going to do once business slows down? Firing people and getting rid of the studio isn’t easy. Your fixed expenses will go up and are likely to stay up. Make sure you have a plan for maintaining the volume necessary to keep you going afterward.

14. Be prepared to answer a lot of questions.
Groupon clients are not familiar with you or your way of doing business. Make the process for booking a session so easy an eight year old can do it. Create a special page with easy navigation for Groupon clients. Anticipate the dumbest of questions – and make the answers easy to find.

15. Be careful of the expiration date of the offer.
Up to 20% of the buyers will attempt to redeem their coupon in the last month of the offer. If the weather is bad or it’s around the already busy holidays, you’ll find yourself wishing you’d picked a more convenient end date.

Vancouver photographer Miranda Lievers successfully used Groupon to add portrait photography into her high-end wedding studio. She feels that keys to her success were 1) including only one delivered photo in her offer to ensure the possibility of an upsell and 2) she had her staff and processes for booking and managing clients in place and ready to go so that she could handle the high volume. Of her 261 sales, she’s seen a 65%-70% redemption rate. Of those, 81% have placed post-shoot orders.

It’s easy for your mouth to water as you think of all the clients a sale with Groupon will bring in. There are downsides however. According to photographer Lievers, that amazing experience that the client had with you doesn’t necessarily translate to return clients. In the client’s mind, the amazing experience was a result of using Groupon so the next time they need a photographer, they’re more likely to select another Groupon photographer – not you.

Worse, if you fail to deliver excellent service and product (because you’re overwhelmed and under-prepared), you may well find your studio name getting slammed on consumer review websites. One bad review is okay, imagine getting ten, twenty or more. Overnight success on Groupon may well lead to death via Yelp.

If you follow the all-too-common pitfall of overbooking and offering too much, you will pay the toll. Burnout and frustration will surely follow. As Miranda Lievers put it, “Photographers who don’t comprehend how Groupon will affect their business will absolutely go out of business.” Now that you know the scoop, this better not be you!

About johnmireles

Photographer, writer, thinker, climber, outrigger canoeist, bad guitar player and even worse singer.
This entry was posted in Knowledge. Bookmark the permalink.

1 Response to Making Money with Groupon

  1. Sarah Jayne says:

    interesting – thanks

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