Wednesday, March 21, 2012

Is GroupOn Good For Golf Instructors?

"Is GroupOn Good For Golf Instructors?"
By Sean & Stef Mysel

One of the giants of our modern marketing world is and its competitor websites.  For those of you who aren't familiar with GroupOn, it's a website that negotiates deep discounts with retailers for their goods and services which is passed on to the consumer.  For instance, here in the East Bay, you can purchase a car detailing that normally runs $125 for $75..pretty killer deal right?  Well it is for the consumer but for retailers and the purposes of this discussion, we'll do the math for golf professionals.  Here's how it works on the golf professional side of the table.

GroupOn or a company similar to GroupOn has you fill out an application talking about your business, asking for your website and some general information.  Then a representative calls you from the company (so far they have been very pleasant) and asks what you are looking to do.  You tell them that you want to sell more lessons and so they ask you what the rates are.  For the purposes of easy math, you charge $100 per hour per lesson.  Great the representative says, they tell you that they can put your info up saying that you normally charge $100 per hour, but you are offering lessons for $50 for a limited time.  GroupOn punches out emails and ads on their website and as people sign up for the deal, they pay GroupOn which in turn pays you in the form a check every couple of weeks.  The "back room" part of the deal is that for each $50 lesson sold through them, they take 50% or $25 per lesson sold.  So let's back up and check the mechanics of the deal:

Normal Lesson $100
GroupOn Discount (typically) 50%
New Price $50
Your Cut $25

Here's The Math -

GroupOn Arrangement
100 lessons X $25 = $2500 in revenue for 100 hours worked

Normal Arrangement
100 lessons X $100 = $10,000 in revenue for 100 hours worked

Here's where things get tricky and this is no slight or criticism of GroupOn, in full disclosure I am going through Gilt City which has a 65/35 split in my favor.  But here are the pros and cons of the arragement:

Pros -
These guys are beasts and deliver volume.  An example of a golf pro in Burlingame, CA who did a similar deal and received 100 lessons which netted him somewhere in the neighborhood of $4000 or more in a month and change.

They do the marketing and are darn good at it

NO and I repeat NO out of pocket expenses

Cons - It can't all be rosy can it?

Prepare to take a beating on your margins and perhaps your pride.  You will sell your services at a deep discount, do more work and may not make any money.

Potential loss of perceived value and branding for your product

Possible conflicts with current students who paid a higher price

How do you move forward or should you move forward?  That's where you have to decide for yourself.  Everyone's situation and business is different and there isn't a magic bullet for any problem.  If you are a well respected teacher like a Haney or McLean, you run the other way from something like this.  But, if you are in the middle of nowhere with little foot traffic, it can work.  The key is what you offer and how you price it out.