>>>BEGIN TRANSMISSION<<< In this installment of our TruthSquad series, we explore some basic math and beginner-level logic. Hope you enjoy!
Why Group Buying Doesn’t Work for Weddings
With the rise of sites like Groupon and LivingSocial, it was only a matter of time before someone thought “Wait! We should do that for weddings!” While there are hundreds upon hundreds of horror stories from across the nation about group buying and what it did to their businesses (read this, and this, and this, and this), this concept is particularly stupid for weddings. In the past year, several wedding-specific, Groupon-like websites have cropped up on the internet – most notably Wedobo.com, WeddingQpon, and WeddingChannel Deals. I’m sure it’s only a matter of time before both business owners and engaged couples realize that the group buying concept doesn’t work for weddings and that the supposed “deals” that are offered aren’t deals at all. Until then, here’s my explanation of why “Groupon for Weddings” will never work.
Group Buying in a Nutshell
In order to understand why this is so stupid, you first have to understand how the system works and the calculations a business owner makes when offering a “deal” on one of these sites. Let’s start with something that’s easy – a restaurant.
Joe owns a restaurant called Joe’s Diner (he’s not that creative). His diner does pretty well for dinner, but his lunch business stinks even though his restaurant is close to a business park. After labor costs and operating expenses, let’s say Joe makes 40% profit on any lunch entrée he sells. Joe creates an online group deal where customers can buy a $9.99 lunch entrée for $7.99. Here’s Joe’s thought process as a business owner:
1. Even if people actually show up and actually get the lunch they’ve paid for, he still break even at worst. Joe has to pay the deal website an additional $1.99 per sale for the honor of offering his deal on their site (yeah, that’s how it works), so he is actually only getting $5.99 of the normal $9.99 price for the entrée. At a 40% margin, he makes no profit on the entrée but still makes a small profit on any drinks and side items that are ordered and his servers still make tips.
2. Since people are coming into his diner at lunchtime (and presumably having a good experience), then they are more likely to come back and eat at Joe’s again at the full $9.99 price. It’s good exposure for his restaurant, and it doesn’t really cost him anything to do it.
In this scenario, Joe can’t lose. He can get people to come in and try his diner for lunch, and he’s able to build a client base of repeat customers who liked their 20%-off lunch. Makes sense, right?
This is the “best case scenario” for group buying, and every so often, the stars align and it actually works out well for everyone. Customers get a discount, the business gets people trying their products and coming back for more, and the deal website makes out like a herd of thievin’ bandits for doing next to nothing. More often than not, though, it ends like this.
Reading all of the terrible stories online, these types of sad-ending scenarios are all too common. Businesses either get completely screwed by the deal website, or are either under- or over- prepared for the amount of business they get from the deal and end up losing way more money than they made. But it’s even worse for wedding businesses – here’s why.
Why Weddings and Coupons Don’t Mix
So, why is group buying for wedding services such a bad idea? In the example of Joe’s Diner, Joe has three things that most businesses in the wedding industry don’t have: scalability, repeat customers, and a “regular price.”
Joe can sell as many $7.99 lunches as he has seats in his diner, cooks to make them, and servers to serve them. The faster his servers can turn their tables, the more lunches Joe can sell. The bigger the deal gets, the better it is for Joe because he can keep doing the same thing over and over again and maintain the quality of his product. Most wedding businesses offer services, not products, and the scalability of any service-based business is limited to the number of skilled people they have available on any given day.
Are there companies in the wedding industry who will send out unskilled (or close to it) people to do a wedding? Sure. It happens all the time – in fact, big DJ agencies are among the worst at this and their online reviews often reflect that. The saying “there’s no such thing as a free lunch” applies to services more than any other type of business.
The only types of wedding businesses who can come close to playing the rules of scalability are massive agencies with large rosters of subcontractors they don’t (or can’t) control in terms of quality. Find me one photographer who works for Bella Pictures and thinks that the company delivers a consistent experience for all of their customers.
Can I Do Your Wedding Again?
Group buying does not increase customer loyalty -- these sites eliminate customer loyalty. The customers are loyal to the deal site, not the business. Since there are almost no repeat customers in the wedding business (we’ve only had one client use us twice, out of more than 1,000), that calculation that Joe made about building his lunch business doesn’t really apply to a wedding business. Yes, a wedding business can get referrals from the weddings they do; we get referrals from our weddings every day. Maybe several engaged couples will even be among the guests at the wedding, and they’ll all be clamoring for business cards at the end of the night. Guess how much they’ll expect to pay for their wedding? The same price their friend paid.
Now, instead of a one-time deal to generate more business at a “regular price,” the company has generated more business at a lower price. Probably not what they had in mind.
Here’s a Coupon for 99% Off Our Price of $100,000
Finally, there’s the biggest reason that group buying and coupons don’t work for weddings – there is no “regular price” for most companies in the wedding industry. Most wedding businesses are not like ours. We have flat-rate pricing, post those prices on our website, and do not make exceptions. My own brother paid full price when Anthony DJed his wedding last year. Almost every other business in the entire wedding industry does not have standardized pricing, which makes group purchasing and coupons complete and total hogwash.
Jennifer and I used to work at a big DJ agency before we started MyDeejay, and we know exactly how that game is played because we saw it firsthand. The company had a coupon they would give out at bridal shows, and if anyone actually redeemed the coupon, it didn’t matter because there was no “regular price” from which to deduct the coupon. The company’s salespeople (including the owner) would do the exact same presentation as they would with any other customer, inflate the “base price” to whatever they wanted, apply the coupon, and that was it. The customers thought they were getting the same service for less money, but they were really getting the exact same price they would have otherwise.
When a customer buys the $7.99 deal for a lunch at Joe’s Diner, they know they got a deal because they can look at the menu and see their lunch priced for $9.99. That’s the value in a coupon or a group purchase – it’s a discount off a regular price. For most wedding businesses, though, the price of their services (and products, for the most part) are not set. As far as I can tell from looking through hundreds of pages of wedding deals on multiple websites, nearly all of these so-called “deals” are simply discounts off of an artificially inflated regular price that doesn’t actually exist. $1000 off a $2500 DJ package on a Friday or a Sunday? I’d be willing to bet that $1000 that they quote $1500 to anyone who calls them for a Friday or Sunday. If there’s no regular price, then a discount off that price is meaningless. It’s nothing more than advertising shaped like a coupon. That “deal” is not a deal at all – it’s a sham.
To make matters even worse, if customers are using a coupon or group buying site, they are actually PAYING the site to get the exact same discount they would have received if they had called the vendor directly. Yeah, sign me up for that one…
So, there you have it. Do the math, and the truth comes out. If you couldn’t tell already, we won’t be offering any coupons or group deals. Ever. Think about it this way – if your wedding is supposedly important, why would you treat it like lunch at a diner? If you needed a kidney transplant, would you buy a coupon on the internet? Those things are expensive too…
For some people, their wedding simply needs to be done cheap. For other people (like our customers), their wedding needs to be done right. We will always choose to do weddings right.