My Experience With Living Social Daily Deals as a Small Busines Owner

I am writing this because I feel that running one of these highly discounted deals has done more harm to my business than good, and there is no real way out there to warn others who are considering doing them to think twice about doing it. I've tried reviewing Living Social on a reviewing site, but I was told by someone located in Washington DC (Living Social's home base) to take it down. I also tried reviewing the app, but that was removed as well.

If you're a retail or dining business where people often spend more than the value of the coupon, then great. If you're a service, then be careful. Here's my story.

After my accident on September 1, I was freaked out that I would not be able to work for 3 months. I recalled being contacted a few months earlier by Living Social to run a "Daily Deal" sort of coupon. I was also talking to Groupon, and Yelp had contacted me to be their Daily Deals Launch Partner while I was out of the country, since we were one of their oldest sponsors with a TON of 5 star reviews and had maintained a 5-star rating over all, after over 5 years of being on Yelp.

I thought it would be a good way to generate more business since I would not be able to do the hands-on work for 3 months with my injuries. What I wasn't aware of was that I also had a concussion, and I probably should not have been agreeing to anything.

I called the rep who had contacted me, and while I felt pressured, he agreed that he would see if we could run our special in October. We ended our call on that note, he sent me the paperwork, and I signed it as I said I would, and sent it back. Then for weeks, I heard nothing.

Nothing about the progress in scheduling my deal, nothing more about planning.

Since I was formerly an advertising sales rep, I kind of expected that to happen once he closed me. I called my rep, Colin, on about Oct 15th to express my concern--particularly about how I noticed that companies that ran these deals often ended up with LOADS of negative reviews on review sites such as Yelp and that it would ruin our 5-star rating. I asked if we could not do it since he failed to follow up with me and I had a concussion when I called him. Most of all, however, was my concern that we would get overly entitled people who expected us to bend over backwards to accommodate unreasonable demands. And that they would go write negative reviews when we did not treat them like the "special" people that they are (Fortunately, 98% of the people have been great so far).

He denied that he dropped the ball and coldly stated that I had signed a contract and there was no chance. Big red flag.

A couple of things that Living Social does not publicize is that they take 50% of what you pay for your little coupon, so in reality, the business is getting HALF of that 50% off coupon--25% of what they normally charge. They also refused to allow us to put a cap on the number of coupons sold. In lieu of this, they encourage service-oriented businesses to limit the availability of appointments--and they don't tell the public this--which makes the business look like they could not handle running a deal. Or, they suggest that you pay the therapists less for Living Social clients. I respect my therapists as professionals and want them to be able to make a living, so I chose to continue to pay them their full rate as long as I could. Besides, I considered it my decision--an *investment* in growing my business, if you will. A gamble that will end up costing me approximately $13,000--the most expensive marketing I have ever done--when this is all said and done.

All the while, Living Social makes off with $20,000 and in some cases, even more.

Sure, it brought us that amount as well, but in a regular month, our payroll is half of that. With the influx of Living Social clients, we went through that in 6 weeks. How? Since we pay our therapists pretty well, each living social coupon redeemed was actually *costing* me between $7 and $20 in payroll costs alone. That doesn't include linens, rent, phone and other costs. YES. What we received for our Living Social deal that we have to honor for a whole year, covers payroll for 6 weeks, and the rest is out of my pocket. I ended up having to pay the therapists out of my savings until I finally had to ask them to take a lower rate for the Living Social clients. Two refused and then quit. The others will only take one per day, and some only take one per week. I see as many as I can, but need to limit the number of clients I see, as I am still recovering form a broken hand and a separated shoulder.

Next: The quality of the clients we've received from our Living Social deal, what people expect despite our efforts to manage expectations, and the effect this has had on our Yelp reviews. I know this may be controversial, but I've got to speak up about it. I'm sure that I am not the only business that has had an experience like this with one of these coupon companies.