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 By Neil B. Gailmard, OD, MBA, FAAO, Editor August 10, 2011 - Tip #494 
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Groupon and Other Daily Deal Sites

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I promised more on how to increase patient demand, which I believe is the biggest problem facing optometrists today, so this tip will focus on one way to do that.  Increasing patient demand generally falls under the category of marketing, and there are many great ideas that have proven successful, but I'm going to focus on strategies that have a large impact.  I'll present more ideas in future tips and I welcome your input if you care to share a marketing idea that has worked well for you.

What is Groupon?
By now nearly everyone has heard of Groupon, but just a year ago it was a fairly new concept.  The marketing strategy of a daily deal has been called a social movement.  Groupon made national news when it rejected a $6 billion offer from Google in December 2010 and the valuation of the company was in the $20 billion range when it went public two months ago.  While Groupon is the largest purveyor of daily deals, there are many others such as LivingSocial and now internet giants like Facebook, Amazon and Google are also launching similar services.

These sites offer fantastic deals on all kinds of goods and services, from restaurants to eye care.  Here are the basic terms:

  • The business offers a special deal good for one day only.  The deal is typically very aggressive such as 50 to 75% off the usual price.
  • A minimum number of people must buy into the deal or it is cancelled.  This rule guarantees a big turnout, which is something traditional advertising can't do.
  • There is no upfront cost to the business.  You only pay if the deal goes through.
  • The daily deal site handles all the marketing effort.  They send an announcement about the deal to interested people in the local area via email.  These people have opted-in to receive these emails and they often check their email every day to see what great deals are out there.  When the customers find a great deal they often use Facebook or Twitter to spread the word.
  • The customer (patient) buys the deal from the daily deal site and receives a voucher via email.
  • Typically, the daily deal site keeps half the amount paid and pays the other half to the business.  For example, if you offered $200 worth of eye care for $50, and the deal reaches the minimum buyers, you would actually only receive $25 per patient.
  • The number of people who take the deal is often quite high.  I had a friend who set the minimum at 25 people but when the deal went through his practice saw 349 patients with a Groupon!   The deal can be capped to avoid too much business.

Can you make a profit?
One criticism of sites like Groupon is that there is no profit to be made and only the customer and the daily deal site do well.  That may well be true when you consider your cost of goods and other overhead expenses, but it also misses the point.  The daily deal is a new approach to marketing and should not be viewed in the same way as running an ad in the newspaper or sending a direct mail piece.  The goal is to stimulate a large number of people to experience your practice with the hope of retaining a large number of them in the future as loyal patients. 

As you look at the potential profit of a daily deal, decide if your practice currently has unmet capacity (appointment slots that are unfilled or extra time that could be opened up).  If so, don't look at your usual practice costs but rather the marginal costs.  This approach views your fixed cost as already being met - so how much additional cost is incurred by running the deal.  The answer is probably only the cost of goods.  Cost of goods is typically 30% for optometrists, when services like eye exams are included.  It is very possible that many of the Groupon users will buy additional goods and services beyond what the deal covers.

But the point is not really to make a big profit on the daily deal.  It's an investment in building your practice and creating a buzz.

Will you keep the patients?
I think eye care professionals do extremely well with capturing patient loyalty.  One might argue that patients who find you through a daily deal will just move on to a cheaper offer when eye care is needed in the future, but I think the majority will stay with you.  I'm sure this varies from one practice to the next, but with insurance plans and excellent customer service, I'm betting you can keep a large percentage.

Best wishes for continued success,

Read Past Tips Neil B. Gailmard, OD, MBA, FAAO
Editor, Optometric Management Tip of the Week

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Send questions and comments to neil@gailmard.com.

Dr. Gailmard offers consulting services to eye care professionals through Prima Eye Group; information is available at www.primaeyegroup.com.

Please Note: The views expressed in Management Tip of the Week do not necessarily reflect those of the sponsor.

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