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"Too Good To Be True" = Kiss of Death for Local Business


Austin Texas Portrait Photographer Tim Babiak

When you're in the portrait photography business, marketing is key to success. One of the latest marketing tools is provided via "deal-of-the-day" websites like Groupon and Living Social. The way they work is simple. A provider (such as a portrait or wedding photographer) comes to an agreement with the website as far as the structure of a deal to offer to the website's subscribers. In general, these deals include steep discounts - generally 50% or more. Subscribers to the website who buy the deal get a coupon they can redeem for the goods and services. Typically, the money collected by the website is split 50/50 with the provider (such as a photographer). 

I've had conversations with many other photographers and opinions are mixed. In general, more experienced shooters way they want to stay away from this tool because they don't want to marginalize their business. For example, if they offer a $350 session for 50% off, they wind up collecting $87.50 for the session then they need to try to upsell to make a reasonable margin. On the other hand, new photographers looking to build their client base generally see this "deal-of-the-day" tool as a great way to jumpstart their business. Which is right?

Yesterday, a news story came out about a beauty salon that used one of these sites and ended up going out of business as a result. (The full story is at this link.) Apparently, the salon offered a $499 package of services for $99. The offer was so compelling that 5,000 people signed up for it! If you do the math, that means that the deal-of-the-day website as well as the salon would get a check for close $250,000 from the sale of the voucherss! That was the good news. The bad news was this - the salon was on the hook to deliver the services it had promised. According to the news story, "the salon would have to give nearly 14 half-day treatments every single day for one year to honor all the vouchers." Take the math a step further - assume each treatment can be performed by one person. You'd need seven people working full-time for a year to fulfill all of the coupons. That means each person would make about $35,000/year during that time before paying overhead to the salon. To some people this may sound like a nice living but, to a salon services provider making $60,000 - $80,000/year it's a nightmare. To mitigate the situation, the salon apparently limited the number of coupon sessions it offered and before you knew it, according to the news story the salon's "voicemail greeting said they were booked into 2012 for the voucher."

Over the weekend, after 34 years of business, the salon abruptly closed.

That story was about a beauty salon and this blog is about photography so what's the relevance, right? If you're reading this blog, you're either a photographer or someone who is a customer of photography. For either party, these deal-of-the-day websites can provide a "too good to be true" offer if you're not extremely careful. If you're a customer, you may find yourself with a voucher that's difficult or impossible to redeem. Remember, most quality photographers don't deeply discount their services. If you're a photographer, you may find yourself with a stack of business that doesn't add up to much revenue at the end of the year.

It's entirely possible that these websites can provide a deal that's a win-win. That being said, if something looks too good to be true, it probably is. Proceed with caution.                                                                                                                

 


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