How to Structure a “Deal” for Social Commerce Websites

“Deals” are the current trend and they won’t be leaving us soon. 

Make sure your deal is Win-Win-Win

There is a growing sub-category of social media known as social commerce. The group is dominated by the popular buying sites, Groupon and Living Social which promote daily deals in specific cities through e-mails and social network.

Most of the deals are very appealing…even sexy. I read where they actually employ comedy writers to write the copy for the ads. I have bought some very good deals myself…like 5 Yoga classes, a car wash with detailing, and numerous meal deals.

Let me tell you about one…a charming little restaurant in my town that is known for good food. I bought the deal which entitled my wife and I to two fixed price meals for half price. Normally the meals cost $80 but we paid $40.

We arrived to an unreasonably crowded restaurant, and as instructed by the deal, revealed our coupon at the start.

Everything went downhill from there. The place was being served by one waitress, who was the owner, helped out by a busboy. Totally understaffed. My first thought was to feel bad for them until I realized that I was being treated like a second-class customer. I could feel the chill in the air.

The courses were served in an arrhythmic fashion but actually were pretty good…but the service and the cold shoulders ruined the experience. The waitress actually threw the check down at the end of the meal…I didn’t know how to interpret this behavior until I went home.

I definitely left angry…and you know what they say about angry customers…they will tell 25 people.

At home I immediately checked out this particular Living Social deal. They had sold over 550 of them. They had to be fulfilled in 4 months. My bill that night was $8.50, not including the $40 that I prepaid…it was for coffee and taxes.

I did the math. Five hundred and fifty quality 4 course meals served by an overworked waitstaff over 4 months for $20 per meal (the social commerce group gets 50% of the deal), is a formula for disaster. No wonder we got the cold shoulder.

Old Model New Tools

The model that these social commerce websites are using has been around for many years. It is known as “buy first then sell.” For example, say you had a group of customers that you knew were in the market for certain products or services, and say you had a place to procure (good word) these products or services at a very cheap price…and you sell them fairly cheaper than the marketplace…in other words you could make a deal. That concept has been around since the dawn of man.

You would be in a pretty good position if you had the customers, or could buy the goods at great prices, or both.

Okay…what’s this got to do with dentists?

Well, insurance companies, HMOs and PPOs having been making these deals for years. Now with the new tools of social media we have new players in the game.
Actually people who “fence” stolen goods could be considered using this model. Think about it. I know that poor waitress entered into the deal with her own free will…but it was pretty seductive to get all those new patients…er, customers.

I Want to Be Honest With You

I ran a Living Social deal. I did a new patient exam, full set of x-rays, a prophy and a $150 coupon for future dental work for $99. We had 20 deals sold. I was very satisfied…happy even. I created the deal because I believe in these economic times we might want to consider more risk reversal for our patients to introduce them to our practices. It was  pretty good, I thought, for everyone…merchant, customer and agent.

But Living Social didn’t think so…they don’t want to do another deal with me because I didn’t get enough deals.

They tell me that tooth whitening is what really sells. But I did the math on that and saw a local dentist had sold over 150 Zoom whitenings at $150 each. That didn’t add up for me…sounded like that restaurant. Do you know how long it takes to do that much bleaching?
And when do we get the time to meet these new patients?

Actually that is the dark side of these sites. In an article on Econsultancy.com they reported, “after three months of Groupons coming through the door, I started to see the results really hurting us financially. There came a time when we literally couldn’t not make payroll because at that point in time we had lost nearly $8,000 with our Groupon campaign. We literally had to take $8,000 out of our personal savings to cover payroll and rent that month.”

So actually this business model is a good one…for the social commerce sites. Groupon just turned down a 6 billion dollar offer from Google.

This is big business…Amazon.com invested $175 million into Living Social in 2010.

This trend will not go away…and in today’s economy, where everyone is looking for a deal it’s hard to distinguish between good business and the “pusher man.”

Here’s the Real Problem

I recently inquired about doing a Groupon deal…this is the e-mail response I received:

“Thanks for your interest in Groupon.

Unfortunately we have had an overwhelming response form the dental industry, and our pipeline is full for this type of feature at this time.

We have your information on file, and we’ll be in touch if an opportunity arises in the future.

Again, thanks for your interest in Groupon.”

Yes, dentists are flocking to make these deals in every neighborhood in this country.

My bottom line?

I have been fighting against the commoditization of dentistry for years…first insurance companies, then advertising and now social commerce. See through the illusion. If you feel you need to get involved follow some of these guidelines:

1. Think of Covey’s 4th Habit, Win-Win or No Deal.

2. Understand your acceptable loss…and think about time, and energy as well as money.

3. Never compromise the quality of your work or your philosophy for the sake of the deal…long after the social commerce site is gone…your business remains.

I would love to hear your thoughts and opinions on this growing trend.