Thread: Coupons: Is It Undercutting?

My husband and I have recently become big fans of Half Off Depot and Groupon. If you're not familiar, these places sell, in effect, gift certificates/cards to places like restaurants, spas, etc. You usually pay around half of the value of the card, sometimes even less--so, say you're purchasing a $40 gift card to the local Moroccan restaurant. You would pay $20. Most of the gift cards come with restrictions, such as you can't use them during peak times (usually weekends).

I recently saw that one of these sites was offering gift certificates for a series of belly dance classes. The rate offered was FAR below the going rate for classes. I'm torn as to what I think about this--good way to get students to try something new, or undercutting? On the one hand, it's presumably a one-time offer. That's how coupons work for other goods and services--they're hoping you try the product and like it, so you're willing to pay full price next time. But there are constant discussions about the need to keep rates above a certain minimum--for instance, just because you have a studio room in your home, which means you have little overhead, doesn't mean you should be charging $2 per class.

Discuss?

very interesting. i'll be interested to see what some more experienced individuals have to say. I think this would be a great way to get your lessons out there but, at what expense.

i think a coupon for a few dollars off an initial class is fine. many businesses follow this model. lots of dance studios offer a discount if a series or multiple classes are purchased on a class card. this seems standard too.

but regularly charging $2 if the local going rate is $10-15 seems like a very deep discount, unless its subsidized by parks and rec, a school district, etc.

is it for a single trial class, or a full session of classes?
makes a difference I think.

I LOVE Groupon!

I wouldn't consider it undercutting as long as it's a one-time coupon (i.e., one per person EVER), it's for a set number of classes (1, 3, or even 8) and that the teacher charges the going rate in all other situations.

This particular deal was about 60 percent off the normal rate (the normal rate being in line with the local standard) for six classes. There was a limit of one coupon per person for this deal, but that wouldn't be a lifetime restriction...just a restriction for the "life" of this particular coupon.

I'm enjoying the discussion. Keep it coming!

I think it's promotion, not undercutting. Coupons are limited in number and duration.

When I run an ad, it costs me anywhere from $200 on up, sometimes to appear once in the newspaper. And might bring in 2-3 new students, IF I'm lucky. I often take a loss on the ad over a single the session, but I hope I'll get one student who stays with me for a while, or eventually refers a friend.

So if I had to take a $200 hit by selling several full-session packages at an extreme loss, I'd consider it an advertising expense. Better than advertising, because I'm *only* out money *if* I get new students.

Unlike undercutting, it's not driving down the overall price or perceived value of classes in the area -- unless one studio is offering so many deals that no one is really paying full price.

If anything, it gets the word 'bellydance classes' and the full-price info 'valued at' out in front of a bunch of eyeballs.

Hmmmmm.... with a groupon offer you're ONLY out the discount. With a newspaper coupon you have to pay for the ad AND offer a discount. That's why people can afford to offer such great deals.

Those are really good points, Lauren! I hadn't really thought about the fact that it does get the "real" price out there so that people understand the value of what they're getting.

I may get flamed for this but sometimes I think dancers are too quick to point the undercutting finger. It's like labeling a dancer with a giant red UC on their bedlah. It's also, the bd community, one of the worse things to accuse a dancer of. That's why I am always very hesitant before throwing those words around.

I understand and agree on the need to standardize prices within a community. But I don't think it's fair to label a dancer as an undercutter without all the facts first. Sometimes it's just a matter of semantics and packaging (short belly gram vs full performance, for example).

As others have pointed out, offering one-time coupons for classes can be a brilliant marketing move in this current economy--especially given that classes hopefully build repeat clients. If it were for a performance, I think it would be a little different.

My vote:

Undercutting -- No
Creative business strategy -- Yes

Originally Posted by aazura

My vote:

Undercutting -- No
Creative business strategy -- Yes

This would be my assessment as well. I don't think you were trying to say it was or was not undercutting, though. I figured your post was merely to start a discussion.

Must be a trend! A local belly dance studio offered this on the my local city's Groupon site just today. I thought it was excellent marketing and I hope they get lots of students from it. The whole community benefits from more people getting interested in our dance form.

Originally Posted by Lauren_

Hmmmmm.... with a groupon offer you're ONLY out the discount. With a newspaper coupon you have to pay for the ad AND offer a discount. That's why people can afford to offer such great deals.

Groupon doesn't cost you anything out of pocket, but they keep a portion of the revenue from each Groupon sold. So you make even less than the groupon deal that you offer.

I know a few dance studios that have used groupon for a series of 3 or 4 classes, and I don't have a problem with it. I don't perceive coupons as lowering rates - I think (I hope!) the GP understands the concept of coupons as special deals and not the norm.

ITA with everyone who posted above. One-time discounts are a sales tactic. I think it's totally legit as long as you don't abuse the strategy, becoming Bed, Bath, Bellydance & Beyond. (They send me 20% off coupons every other week. Does anybody shop at Bed, Bath & Beyond WITHOUT a coupon, these days?) But a lot of dancers offer a free first class, or a freebie class after every 20 classes, or whatever.

Coupons for performances? Uhhh....not so much ..c::..c::..c::

Originally Posted by Samira_dncr

This would be my assessment as well. I don't think you were trying to say it was or was not undercutting, though. I figured your post was merely to start a discussion.

Yes, I didn't mean to come across as, "Ooooooo look what they're doing! Shame, shame, shame!" It was meant as a genuine discussion of whether the broader community finds this to be a good strategy. Because, honestly, I agree that we, as a whole, are quick to jump on others for undercutting sometimes. That's why I was interested in other opinions. ..g.:

Genevieve, I didn't mean to accuse you of accusing someone! Sorry if it came across that way. I guess my point was that every time I see an undercutting thread, I kind of roll my eyes a little. I just want to people to pause and think before they jump to a label.

No worries, aazura! :) I agree with you. Sometimes what gets labeled as undercutting makes me scratch my head a bit, which is why I wanted to hear some feedback on this one.

Originally Posted by SatinWorship19

Coupons for performances? Uhhh....not so much ..c::..c::..c::

Oh, Satin, your post reminded me - I do email past clients and offer a special rate sometimes. (Like, book me in January, February, or March and get a 10% discount!)

But since the discount would still bring me above the standard or close to it, I'm never worried about it. And, in fact, I think I've only booked gigs from this once or twice. It's more to keep my name out there. Kind of a tangent, but I wanted to mention it. No coupons yet in the Clipper magazines that get mailed to your house!

Originally Posted by phillyraqs

Oh, Satin, your post reminded me - I do email past clients and offer a special rate sometimes. (Like, book me in January, February, or March and get a 10% discount!)

This is so totally different! I offer discounts for repeat business and referrals. That definitely makes sense. Discounts during slow months are actually a nice idea, as well. I never thought about that!

It's just like dealing drugs... the first hit is free to get you addicted.

It starts with half off six classes and the next thing you know you are stalking the swap meet.

Originally Posted by roguepen

It's just like dealing drugs... the first hit is free to get you addicted.

It starts with half off six classes and the next thing you know you are stalking the swap meet.

This is totally how I feel! It's the bellydance crack! Thankfully, it's a million times better than drugs, and good for you too! It's, like, the perfect drug!

On a more serious note, I think this is a brilliant marketing strategy. It's not really any different than many of the other marketing strategies I've seen out there. Many instructors, including myself, offer free promotional classes occasionally on the idea that once they try it, they'll be hooked. I've heard of dancers offering a discounted session when it's being purchased as a gift for Valentine's Day, Mother's Day, or Christmas. I've also heard of dancers who offer a one-time promotion of a discounted session or free class as a promotional with the purchase of flowers for Mother's Day or Valentine's Day. It's good for the florist since their product just increased in value and it's a great way to promote your business to a new audience. As long as it's a special, one-time deal kind of thing, I don't think there's anything wrong with free or discounted classes as a marketing strategy. It just has to be reasonable, like one free class or one discounted session for the duration of the coupon or offer.

I feel the same way about my preregistration offer. In order to encourage students to preregister instead of just dropping in on the first day of class, I offer a $10 discount off the registration fee. They can register in advance online or on location. This is mostly so I can get a good head count before the session runs and reduces the chance that I'll have to cancel the class due to lack of students. This may be a limited time offer, but for now it actually helps encourage students to register in advance instead of waiting until the first day of class. With having to arrange a sitter for my kids, it helps to know in advance if I'm going to have enough students.