Mystery Dinner Playhouse

It’s hard to believe, but we sold 4,000 tickets to our Arlington location in 24 hours through the online discounter, Living Social. Apparently, we set some kind of record for their NoVA branch.

For those of you not yet familiar with this new phenomenon, here’s how it works:

Businesses partner with one of the many new online discounters, in our case, Living Social, but there are tons of them cropping up – Groupon, Live Ginger, Virginia Living, Deal of the Day…they ask a business to offer 50% off or more the regular price of goods or services to a huge list of people who have subscribed to receiving emails alerting them of the “daily deal.” The deal is available for 24 hours and customers can buy one or more vouchers (depending on the deal) to be redeemed before a predetermined expiration period.  They offer incentives to subscribers giving them a free voucher if they alert their friends via social media (twitter, fb) and at least three friends end up buying the deal because of the referral. The online discounter takes in all the initial sales and processes all payments. They in turn, cut a check to the participating business within a week or so, MINUS 40% commission (some discounter ask for up to 50%). The participating business ends up with a big fat check (hopefully) and has some immediate cash flow coming in. During this bad economy, most small businesses are in dire need of cash flow, hence the popularity of these programs for businesses as well as consumers.

In our case, we offered 50% off dinner and show, up to four vouchers purchased per subscriber to be used within one year of purchase. We previously partnered with Living Social – Richmond and sold 400+ tickets and thought that was amazing. So, you can imagine how floored we were when we sold 4,000 in the DC area! I don’t think that Richmond has really caught the online discounter wave like DC. Marketers and advertising agencies have long known that the Richmond area is considered a “laggard” market – it is a market who is most resistant to catch on to the latest trends. Minneapolis, like DC is considered one of the more progressive markets and will latch on to trends immediately. I’ve lived in both markets and can attest to this fact. But, I digress…

Who’s buying these discount vouchers? Our experience is that young, 20- something females are the core market for these vouchers. They are employed, have disposable income, and make fairly good money – and they LOVE to consume! We’ve had calls from this demographic stating that they just bought the vouchers, but know nothing about us and want more info. Really? Why would someone buy something without knowing what they are buying? Well, that seems to be the phenomenon around this business model. The deals are so cheap that consumers grab them and ask questions later.

What’s in it

for the business offering the deal? That question, on the surface, seems to have an easy answer – generating more business and making money, even if it means 50% less revenue. For some companies this kind of set-up can really be profitable because their mark-ups are already at 100%, so they take in 50% profit instead. On top of that, once the consumer is in the door, they can sell other products to make up for the initial loss from the discount vouchers.

Our company actually doesn’t make money on doing this type of business, but the infusion of cash flow helps us stay afloat during slower business cycles and we can absorb the loss over time.

Also, according to Living Social, 30% of consumers who buy these vouchers never use them – 30%! If that is the case, then that eliminates most of the sting from Living Social taking their giant commission.  And let’s face it,  40 -50% commissions that these companies are charging for their services is practically legalized loansharking.  Desperate times call for desperate measures, and companies like Groupon and Living Social are taking full advantage of the downed economy making millions a day in commissions from small businesses struggling to stay alive.

I hope in a few years time, this way of doing business will not exists anymore.  I’d like to think that this is the last time we participate in a program like this, but in 17 years of doing this for a living, I’ve learned to never say “never.”

Laura Daab