The Little Red Day Spa Builds a Partnership, a Strategy, and Soon a Franchise

Since our founding in 2008, Groupon has connected over one million merchants with their communities through effective local business marketing campaigns. Recently we sat down with Jeff Hengst, Owner & Operator of the Little Red Day Spa, to hear one of these success stories. Jeff told us about the deep relationship he’s built with Groupon, and how he’s leveraged it to build a strategic roadmap from scrappy startup to soon-to-be franchise.

Founded in Seattle, WA in 2007, the Little Red Day Spa caters to couples who want an intimate experience in a unique space. Each appointment lasts approximately 2-3 hours, with guests choosing whether they want to get a couples massage, relax in a private suite, or enjoy the many treatments and services available in the day spa. What the spa really offers is genuine care and a deeper connection between the guests who visit.

With that in mind, it’s unsurprising that Jeff credits a lot of the Little Red Day Spa’s success to the depth of understanding and care which defines the relationship he and his Groupon rep have cultivated.

From Startup To Franchise, With Help From Groupon

What motivated you to start the Little Red Day Spa?

I graduated from Seattle University with a Master of Fine Arts degree, and I’m an artist first and foremost. But when I turned 50, I felt that the vagaries of the artist life weren’t cutting it anymore, and I wanted to generate some passive income. I also saw the cultural shift from things to experiences, from objects to services. Some of my customers were even asking to rent my paintings for events instead of buy them.

Really, I think of the spa as an extension of my art. I like the experience it can give guests. To me it’s the same experience I want people to have when viewing my art.

What spurred you to decide to become a Groupon Merchant?

For the first five years or so, we were a small mom-and-pop business. When Groupon first contacted us, we didn’t think we had enough of a profit margin to handle running a deal. So, we decided to run our own discount campaign, and that showed us that it actually was doable. Afterward we reached back out to Groupon, and that’s when the business really took off.

What works to get new customers through your doors, and what keeps them coming back?

Apart from word of mouth, Groupon’s reach helps a lot to bring in new customers. Another thing that helps is that we have a unique look that’s consistent across platforms. Our space is very unique and we use original photos to help set us apart.

As to what keeps them coming back, it’s fun to watch guests try to explain it after their first time. What makes them want to come back is the feeling of reconnecting with their partner. It’s a spiritual experience in the sense of an authentic, genuine connection.

In fact, at our price point, I didn’t really expect regulars to make very frequent visits, but that feeling just hooks them. It starts as a one-time thing, then it’s a treat for special occasions, and next thing you know they’re coming in monthly, pretty much whenever they can.

Who is your typical Groupon customer, and how do they differ from your other guests?

They don’t. They also have a high rate of repeat business. Maybe about 70% come back.

What does Groupon provide your business that you couldn’t do on your own?

The tech part is obvious. But the relationship is also important. My Groupon rep has helped me think strategically about the whole year. She helps me think through when to pull back on my deals and how to balance my offerings, instead of me just taking a series of shots in the dark. It’s a type of big-picture thinking that, sure, I can do it myself now, but it was really invaluable that she helped me get there. Groupon takes a genuine look at my business, and they really do care.

Over the years you’ve offered deals on massages, gift cards, couples retreats, etc. What’s worked best for you, and how do you get the most out of your Groupon campaigns?

Since we’re a year-round business, we’re interested in campaigns and programs that work across seasonality, not just making a quick buck right now. This is what I mean when I say my Groupon rep helps me think strategically instead of just tactically.

There are some holidays, like Valentine’s Day, where we can’t sell bookings because it’s so busy. However, there’s no limit to how many gift certificates we can sell that day for future use. So in the month leading up to that day, we’ll back off and let our other vouchers run out. This way, people who’d otherwise buy those will instead wait for the new deal, building some pressure behind the dam. The volume of vouchers we put up for sale follows these seasonal waves and holiday peaks.

Figuring all this out took a lot of trial and error. I’m grateful that my rep lets me try things out, see if they work or not, and move on. If I didn’t have the autonomy to do that, I’d keep thinking about those ideas for months. She helps me experiment wisely, in ways that won’t negatively affect my core business and which will stay mutually beneficial.

How has this relationship with Groupon impacted your business?

A 9-month campaign last year generated almost $1 million in sales, which is great for a tiny company like us, and definitely something we couldn’t have done on our own. I’m also now getting ready to franchise the business, which I wouldn’t have foreseen when we got started.

How will your experience with Groupon factor into your plan for franchising your business?

I’m actually planning to leverage the strength of our success with Groupon to get investors. We have 1,500 verified reviews, and our current deals are generating $1,500-$2,000 per day in gross proceeds, not counting holiday spikes. Building a reputation and a steady revenue stream is important to investors. It helps to show that the spaces will be filled and the new location will be able to start making money even from the start.

What’s the best part of working with Groupon, and what would you tell another merchant who’s considering working with us?

The best part is the close relationship I have with my Groupon rep, and the guidance she provides. As for advice to others, I’d have two things to say:

One, crunch the numbers first. Make sure it’s a good fit. Groupon doesn’t want you running unprofitable deals on their platform any more than you do, because then they’re not making money either.

Two, don’t think of it as just a way to get some customers who you can then migrate off the platform and convert into “regular” non-Groupon customers. Think of it more as an ongoing strategic partnership to develop your base with a particular type of customer.