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Pros and Cons of Groupon for Med Spas

Posted By Administration, Wednesday, June 27, 2018

By: Alex R. Thiersch, JD, Founder/Director of the American Med Spa Association (AmSpa)

It’s not uncommon for med spas and other aesthetic practices to use Groupon or other online deal marketplaces. Typically, medical spas use these websites to present special discounts to users in their community, but there are several issues to consider before using these services to try and attract new patients.

On the surface, this seems like a low-risk way for a medical spa to present its offerings to a new group of customers, and medical spa deals represent a significant source of income for the deal websites. However, medical spa owners and operators need to know about a few issues related to discount marketplaces before they choose to use these sites to promote their businesses.

Patient Retention

Your average Groupon customer is searching for a cheaper option—that’s the whole point. Patients searching for discounts are probably not going to be as loyal as patients who have taken the time to search for a quality experience. Also, the greater the discount, the less likely it is that the patient will return. Generally speaking, very few people who are directed to medical spas via sites such as Groupon become regulars—most are simply in it for the deals.

This is problematic because most successful medical spas rely on patient retention. In fact, in an average med spa up to 70% of patients are repeat clients according to AmSpa’s 2017 Medical Spa State of the Industry Report. Not only is it over 5 times more expensive to attract new clients than it is to retain current ones, but existing customers tend to spend up to 67% more than new ones, according to an Inc. Magazine study.

Medical spas that partner with Groupon and other deal sites tend to get into what we used to call the “Groupon cycle,” where medical aesthetics practices offer a deal on Groupon not because they actually want to do it, but rather because they just want to get some money in the door. And yes, it is a good way to get some fast cash, but it doesn’t create repeat business, so after a month or two these practices have to do it again just to get some money in the door.

While the idea of having this cash on-hand is appealing, constantly cutting into your margin for clients that are unlikely to return to pay full price is not a sustainable model for success. If you’re selling a lot of treatments on sites such as Groupon, you could run into a cash-flow problem—if your practice is doing most of its business giving extremely large discounts to patients who probably won’t return, you could end up losing a lot of money.

Eventually, medical spas like this operate more or less exclusively on deal sites, and they tend to get bad reputations because their customers, who have expectations that rarely are based in reality, are always complaining about them.

Problematic Patients

Over the past three or four years, five lawsuits involving laser burns have come across my desk, and in every one of those instances the patient had come from Groupon. The correlation is that patients who are searching for discounts are going to be more likely to cause problems than patients who find your practice via more traditional means.

Additionally, a successful offering on a deal site can lead to an influx of clients, which can cause a med spa to become extremely busy and tax its resources. If a facility does not have a staff of the requisite size and with the proper skills to deal with such a situation, the quality of patient care can suffer—not only for those who purchased the deal, but also for the spa’s regulars.

Fee-splitting

In most states, laws require medical facilities—including medical spas—to be owned by physicians or physician-owned corporations. And in most of these states, all payments for medical services must be made in full to the owner of the facility. If a percentage of such a payment goes to someone else, the facility has engaged in an illegal practice known as fee-splitting. The use of deal sites to sell medical treatments is, from a legal standpoint, a textbook example of fee-splitting, since the site gets a percentage of the proceeds generated by the sale of the voucher. However some states, like Illinois, have carved out fee-splitting exceptions for deal sites. Check your state’s medical aesthetic legal summary to see how your state approaches fee-splitting.

In the many years that medical spas have been working with sites such as Groupon, there has yet to be any prosecutions for this, and it seems somewhat unlikely that a regulatory agency would start now. It is worth keeping in mind, though, especially if a patient experiences a bad outcome.

If you want to create sustainable success, pass on Groupon and other deal sites and work on creating lasting relationships with reliable clients. Short-term cash isn’t worth the headaches a Groupon offering can bring. For more information on how to build and run a successful, profitable, and legally compliant medical spa attend one of AmSpa’s Medical Spa & Aesthetic Boot Camps.

Tags:  Business and Financials 

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