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Running a CrossFit Facility Tips and guidance on how to open and operate a CrossFit gym.

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Old 07-09-2014, 06:10 PM   #1
Noah Drew
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Groupon Information

*This is for boxes that have used Groupon.

We recently lost out on some business that was holding us up and need cash ASAP. We are entertaining the idea of doing Groupon or one of those PR sites.

So far I have some clear outlines I want to put in place;
1. 1 month expiration, from Groupon start date.
2. Only able to go to 2 classes M-F, 8 am & 5 pm, which will be only Groupon holders.
3. Groupon will be 6 onramp sessions for $50, half off our onramp price.

If you guys have anymore please feel free to add any you can think of more.

My question to you guys is, how big of a cap should I put on the Groupon and more importantly, what is your experience with Groupon, or other sites that you have used.
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Old 07-09-2014, 06:52 PM   #2
Diana Alt
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Re: Groupon Information

I don't own an affiliate, but I have used groupon for another business I own. It's been a ok experience, but you have to do it right.

1)Be sure you are doing it for the right reason. The need for quick cash is NOT a very good reason to do a groupon. At best, you will get 22-25% of the list price for your service in your pocket. Groupon will require you to discount at least 50% and they will take 50% of the revenue from your special plus credit card fees. Your on ramp that lists for $100 will have to be $50 or less, and groupon will take about $27. (The same basic numbers apply to other sites like living social) It might be a better move to figure out an incentive for your employees or members to bring in new members for a period of time.

It makes far better sense to look at groupon as a way to get exposure to new people, which is what my business does. We are very intentional with the service we sell on Groupon, only offer to new clients, and have a specific path to additional sales we follow. If you feel like your on ramp groupon will do that to build long terms clients, then that is a sound plan!

2) you also need to be very conscious of what the deep discount options like groupon are doing in the local crossfit market. In my area, there are a lot of people groupon surfing between affiliates. This really happens a lot when the affiliate running the special does not clearly articulate what differentiates them from other affiliates. My gym is VERY well known for excellent coaching and a great competitive program. This pulls people in from other gyms even without groupon which of course is the ideal, but also has convinced some avowed groupon surfers to stick with us instead of chasing the next special.

3) consider what it might mean to have people coming to your gym whose primary motivation is that it was cheap. Be prepared to lose a lot of those people and not be able to turn them into continuing clients. Then, if you are committed to trying groupon, GET OVER THE FACT THAT SOME PEOPLE WILL LEAVE after their groupon is done.

4) i would call a couple of companies and ask questions about the demographics of the people who will receive your deals. We recently learned that the demographics, especially socioeconomic status, of living social users in our area matched the marketing target of my small business better than groupon. We are trying our first living social special because of this and are already getting great response. Do this legwork.

5) as to the details of the special itself, I think what you propose is mostly reasonable. By doing the special on a on ramp, you will get new crossfitters rather than just box surfers. You might choose two services to put in your special - one for the on ramp, and one for on ramp Plus two months of classes up to 3x per week. The second option is more likely to convert into long-term clients. I personally would set a low number as I think it's good for businesses when their groupon sells out. So I'd do 2 specials, allow up to 25 or 30 of each to be sold, and limit to one per purchaser plus one as a gift. This would allow for a couple to buy the groupon without having both people need to make a purchase.

I hope this helps!

Diana
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Old 07-14-2014, 08:51 AM   #3
Chris Aitken
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Re: Groupon Information

Diana made a great point that I want to reiterate:

" 3) consider what it might mean to have people coming to your gym whose primary motivation is that it was cheap. Be prepared to lose a lot of those people and not be able to turn them into continuing clients. Then, if you are committed to trying groupon, GET OVER THE FACT THAT SOME PEOPLE WILL LEAVE after their groupon is done. "

A lot of owners take it very personally when customers leave after a month or two, or after using up a small purchase. Those people were *never* going to join your gym unless you slashed your price so far that you lost money on them every class. Basically some people just want the cheapest and that's all they care about. Treat them respectfully, but don't count on their business when their time is up.

In addition, here are my own thoughts, having run these deals myself:

The biggest concern, logistically, is making sure you don't snub current members with the results of your Groupon offer. Have a plan in place about how new Grouponers will be brought in, who will teach them, what classes they can come to, what standards they are held to, etc. Have a fully fleshed out on-boarding/sales process before the first one comes in the door. Yes, you'll have to adjust it as things unfold, but going in blind can absolutely kill you.

Do your math. Find out how much it costs to run a class (based on trainer pay, facility costs, etc). Based on this, how much does each member need to pay in order to cover and exceed costs per class? Now, look at how much Groupon is bringing in per person per class, and realize that you are taking a loss on that person. Now, based on the loss per person, how many memberships do you need to sell to actually profit off running your deal (i.e. what conversion rate do you need to hit profit and not loss, longer term)?

Example (with round numbers, for illustration):

You run 40 classes per month. Your facilities cost $3000/month (rent, heat, water, etc). You pay trainers $20/class ($800/month) and allow 10 athletes/class. You have no other sources of income from this space.

Your cost per class is ($3000 + $800) / 40 classes = $95. At a 10 athlete cap, they each need to be paying the equivalent of $9.50/class to cover costs. Over that is profit.

If your Groupon is 6 classes for $50, and you get to keep $27, then each newbie is bringing in $4.50 per class, for a $27 loss per Groupon sold. If you sell 100 Groupons, then you have a base loss of $2700 for the campaign. Now we know how much Groupon is costing you if you don't manage it correctly.

Lets say you sell MtM memberships at $100/month. You need to sell 27 months of membership to recoup the Groupon loss. You need 28+ months to make a profit off of it. If each member stays for an average of 3 months (this is a low ball estimate, hopefully) then you need at least a 9% conversion rate (9 sales out of 100 Groupons) to meet costs. You need 10% retention to profit.

Keep in mind that the fewer you sell, the longer each person needs to stick around to make a profit. If your membership is low because of retention issues, then this won't happen, and then you have the same problem you started with, too few members, plus you add a $2000+ in loss into the equation. This is not a quick cash option; this is a long game. Worst case, you lose thousands on a poorly executed offer and close because you lack working capital.

Manage this carefully.

Groupon is the long game; not a quick cash maker.
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Last edited by Chris Aitken; 07-14-2014 at 09:25 AM..
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Old 07-14-2014, 10:23 AM   #4
Adam Morden
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Re: Groupon Information

Chris makes some really great points. I'm personally not a big fan of daily deal type sites.

there are 2 things to add to Chris' great example though.

1) the potential loss in the example only occurs if your classes are already full. if you have a 10 person cap, but only 5 people show up, adding in 5 more - even paying 50% of what you want per class to break even, just means you loose less money, not more.

2) If you add say 10 classes for the month to cover the groupon people you increase your expenses by $200, so you would break even on the promotion if you sold at least 8 (@27/each you would actually make a few bucks) if 1 of these people then continued as a regular member then you would be making money off the deal.

I highly recommend you do not mix groupon with regular member classes. I also don't think it's worth doing a groupon if you don't have a high conversion rate for your existing trials (say over 60%) and as mentioned before, if your box has retention problems you have to fix that first before doing a deal.

Daily deals are definitely not the best way to raise short term cash, but they can be useful, if structured correctly, to help you break into a previously untapped market/group of people and then generate more word of mouth growth.
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Old 07-14-2014, 01:21 PM   #5
Diana Alt
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Re: Groupon Information

"I highly recommend you do not mix groupon with regular member classes. I also don't think it's worth doing a groupon if you don't have a high conversion rate for your existing trials (say over 60%) and as mentioned before, if your box has retention problems you have to fix that first before doing a deal."

Adam, why do you say this? Are you assuming that the Groupon people have no CrossFit experience and are therefore unsuitable to be in a regular class?

I would think that if you want Groupon people to have the best chance of converting to regular members and having them be happy, you would want to include them in the regular culture of your box as soon as possible.

d
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Old 07-14-2014, 07:45 PM   #6
Tommy Alfinito
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Re: Groupon Information

Quote:
Originally Posted by Diana Alt View Post
"I highly recommend you do not mix groupon with regular member classes. I also don't think it's worth doing a groupon if you don't have a high conversion rate for your existing trials (say over 60%) and as mentioned before, if your box has retention problems you have to fix that first before doing a deal."

Adam, why do you say this? Are you assuming that the Groupon people have no CrossFit experience and are therefore unsuitable to be in a regular class?

I would think that if you want Groupon people to have the best chance of converting to regular members and having them be happy, you would want to include them in the regular culture of your box as soon as possible.

d
''

You do not mix these members with group-on members because it cheapens your membership. People who paid $50 on group-on are getting the same thing as someone who paid the full $100. This also usually creates a rift - current members versus group-on members and can kill the community. I have a friend who did this and it caused a ton of damage.
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Old 07-15-2014, 12:29 PM   #7
Diana Alt
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Re: Groupon Information

Quote:
Originally Posted by Tommy Alfinito View Post
''

You do not mix these members with group-on members because it cheapens your membership. People who paid $50 on group-on are getting the same thing as someone who paid the full $100. This also usually creates a rift - current members versus group-on members and can kill the community. I have a friend who did this and it caused a ton of damage.
This makes no sense whatsoever from either a marketing/sales standpoint or from the standpoint of running a gym. From a marketing standpoint, the appropriate use of a Groupon is to get people in the door that might not have otherwise found your business and turn them in to long term members. Are those people temporarily getting a cheap membership? Yes. But if you have any clue whatsoever how to convert these people into long term clients it doesn't matter in the long run.

If current members have such a problem with Groupon members, you have a much, much larger community problem that you need to address.
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Old 07-15-2014, 05:45 PM   #8
Tommy Alfinito
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Re: Groupon Information

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Originally Posted by Diana Alt View Post
This makes no sense whatsoever from either a marketing/sales standpoint or from the standpoint of running a gym. From a marketing standpoint, the appropriate use of a Groupon is to get people in the door that might not have otherwise found your business and turn them in to long term members. Are those people temporarily getting a cheap membership? Yes. But if you have any clue whatsoever how to convert these people into long term clients it doesn't matter in the long run.

If current members have such a problem with Groupon members, you have a much, much larger community problem that you need to address.
Do you have a gym? If you truly believe this you are naive.

I ran 2 deals years ago when livingsocial was very different. We put them in their own classes and had a decent conversion rate on the first one (back then it was hard to get on LS, you had to apply and wait months to get on there, it was almost an honor to be picked - we sold 600 deals at $45 a pop the first go around). The second one, living social was starting to change to running a ton of deals everyday and the conversion rate dropped significantly because most people coming in were deal surfers and didn't understand the value a gym could offer.

Our members loved seeing them in their own class. They liked to hang after and cheer on the ones that took a liking to it. I have no doubt that if I just threw them into the regular schedule, the members would have pushed back. Your athletes that have shown they believe you are worth your rates are now being put in class side to side with people that have shown no interest but to buy a deal on another website. These people are coming into class with no previous Crossfit knowledge and are going to take the majority of your coaches times during a class. Now you have your coaches spending time on someone who most likely won't stay and didn't even pay full price instead of your athletes that make up your community.

I can't see myself ever running a deal again - I think I am worth my prices and don't want to discount them. I would rather find other forms of marketing to bring in new clients.
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Old 07-15-2014, 07:52 PM   #9
Diana Alt
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Re: Groupon Information

I don't have a gym, but I have another successful business that has used groupon specials to source and convert high value clients. I also have marketing background which includes advising multiple businesses, including more than one CrossFit gym, on successfully pricing services and converting groupon clients to high value customers. Can you say the same?

The bottom line is that the approach of segregating groupon clients worked for you because your gym has a culture where it's acceptable to pigeonhole people based on how much money they spend. That would be patently unacceptable in my box.

The thing that does make more sense is grouping all athletes based on skill/experience level regardless of how you source them. This is a large part of the reason why I suggested running the groupon special for an on ramp program.
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Old 07-16-2014, 08:48 AM   #10
Brian Lelli
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Re: Groupon Information

We've got both Groupon & LS before and marketed the CRAP out of it on Facebook & our website. We got about 4 sales and made enough to buy some coffee for ourselves.

We're in the midst of trying Groupon out again and we're letting groupon do the marketing this time. Partially due to the lack of response last time and partly because I'm too busy to push it like we did last time.

My experience wasn't good. Not worth the time, effort or money. From what I've seen & heard, lots of the discount-CF'ers just jump around.
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