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Extreme Discounting

As massage therapy becomes increasingly popular, more people are choosing it as a career path, creating greater competition for clients amongst therapists. There has been substantial growth in the number of massage therapists in the past 10 years (See Table 1). Massage therapy is, at its base, a business, and we look to the marketplace for ideas to gain customers.

One method that is becoming increasingly popular is discounting in one form or another. Discounting has gone beyond therapists offering markdowns for special occasions, to clinics offering membership-based discounts. A new group of companies – among them WagJag, Dealfind, Groupon, SwarmJam and Daily Deals ­– are having the greatest impact on the need for discounts in the consumer mindset. These companies have capitalized on the discount niche market by offering advertising services to businesses. Their model exposes various products or services in large-scale ways that individual businesses cannot afford on their own. In return, they must offer greatly reduced deals to the public, and this cost is split between the advertiser (that is, WagJag, as an example) and the business (that is, the clinic or therapist). These coupons are then redeemed, allowing the therapist exposure to a larger number of clients.

Financial Implications
In order to assess the financial implications of discounting, we need to acknowledge why a therapist would choose to discount – it is, basically, advertising, primarily aimed at getting people through the door. At some point in your career (as a new therapist, when relocating, or when returning from maternity or sick leave), you will likely depend on new clients to build or rebuild a practice in order to make a living. There are two basic types of advertising: free (referrals, promotional events and massages) and paid. To build a busy practice, you would likely employ both types of advertising, but what is the cost and return on investment of each?

The “free” advertising likely has little or no direct cost; however, we often fail to place a value on our time and the toll on our bodies. If you work at an event for a community function, you may have to pay for a booth, but, if you are providing complimentary massage, your space may be free. However, you must consider the promotional material, supplies for the massage, extra health-care consent forms, and, more importantly, the time you spend collecting your supplies, setting up, participating in the event, tearing down your booth and repacking your car. You might spend two to eight hours from start to finish, for which you will not be paid. You might even have to book time off your regular work schedule, thus forgoing a guaranteed income. You might gain a few clients, depending on the event and good will in the community, but this may not result directly in new clients.

Paid advertising can include websites (and optimization), phone book ads (with accompanying online listings), local newspaper, flyers, team sponsorships and renting space at a mall, to name a few avenues. You may do some or all of the above to some degree, with varying costs, from one-time fees to monthly or annual fees that can range from a few hundred to thousands of dollars each year. What is the guarantee of these bringing you new clients? None. Obviously this statement is harsh; if they did not bring in any business at all, they would not exist. We do need to appreciate that the more money you put into advertising, the more money you are likely to get out in the form of new clients (assuming you employ appropriate ads for your area to attract the clientele you are looking for), but you need to be vigilant in assessing that you are getting a return for your advertising money. It is hard to give examples of these, as smaller clinics have smaller budgets but also need fewer new clients to be viable, versus the large clinics that have several therapists along with more overhead, larger budgets and needs.

Now, consider the cost of extreme discounting within the limited parameters that might be manageable for a new therapist, or a new small clinic. Many of these discounting companies allow the advertisers to set some conditions on their vouchers. (If the company that you are looking to work with doesn’t, it might be wise to choose a different company.) So, you can, for instance, limit the number of vouchers that you sell, limit one voucher per person and/or have a time limit for which the vouchers are valid. Let’s examine the “costs” of a sample of this type of program. If you charge $80 per hour (we are not dealing with the HST/GST, for now), the voucher sells for $40. The company gets $20 and the therapist/clinic gets $20. If you set a limit of 50 vouchers in three months and have all vouchers sold and redeemed, you will have massaged 50 new bodies and made $1,000 (50 x $20). If you are new, you will have built on your palpation skills and shown more people what you can do. True, many will not return, but you will have had a chance to work on your massage and clinical skills. This is a more effective use of your time than sitting in your room not treating; this may, in fact, be the jump-start that you need to become established. However, do the comparison on what the regular compensation would be –  if you are discounting all the time, you need to treat four times as many clients to make the same income.

One final financial consideration we must mention is the “going” rate, for extended benefits, for massage in your area. Insurance companies use the “going” rate as the standard when determining the amount that they will cover for a massage treatment. They determine this by surveying the area for the fees that are charged and averaging the costs. This could affect us in two ways: if the insurance companies use the rates of the extreme discounting within this average, it would drastically reduce the average cost of a massage in the area; and if clinics lower their normal rates to compete with other clinics who continually offer extreme discounting, this too would reduce the average cost in that area. In either case, the average cost that would normally be covered could eventually be reduced. This would ultimately affect how often our clients can access our service under their extended health plans.

The cost-of-inflation increase, as has happened previously, is not considered in this equation. There is a potential for a clinic to feel pressured by clients to lower their regular posted rate in order to keep up with competitors who routinely use extreme discounting. Unless you are a very secure therapist or clinic owner, you will have to make some challenging business decisions in your future. 

The bottom line, when you’re thinking about whether discounting is for you, is that you need to evaluate your own situation to ensure you get enough clients to cover the costs of your overhead – empty tables don’t pay the rent, but working for greatly reduced rates is not sustainable for long periods either. (For a more in-depth discussion of this topic, check out the blog at  www.stellarmassageseatle.com/2011/06/reason-stellar-closing/).

Public and Professional Perception
The “massage therapist” designation is a very broad stroke and applies to a diverse collection of philosophies about massage. This creates a challenge for unifying our profession as a whole. Many within our community are dedicated to elevating our practice in order to gain acceptance and full equality with other health-care providers, allowing greater access to programs such as auto insurance. These therapists usually, but not always, fall in the rehabilitation spectrum of the massage umbrella and focus a great deal of their time on research and evidence-based massage treatments in clinical environments. There are also therapists who do more energy-based work or focus on relaxation in settings, for example, spas, that are not as clinical.

Due to the variety of settings that we practise in, discounting may have different connotations or be perceived in different ways. It is very common to see discounting at spa packages whereas it is rare to see discounting at physiotherapy clinics. But, even this is changing with the times.

Traditionally, open discounting was extremely rare in regulated health-care professions (sliding scales have been regularly employed for seniors and financially challenged patients, but not openly advertised). Discounting was associated more with the retail environment and tended to have a connotation that implied lower-quality goods. Health-care professions were considered to be professional services of the highest quality and, as such, were rarely discounted.

But, with the economic downturn of a few years ago, everyone is looking for ways to make their dollar stretch. This mentality has extended to all aspects of our lives and now includes health care. As the times change, we see more discounting being utilized within the health-care profession (laser eye clinics, back clinics, dentistry, etc.) in order to secure patients. Many people are facing tough times, including loss of benefits, decreases in pay or even job loss; a massage is still seen as a “luxury” and something they may not be able to afford at the going rate. If clients don’t try massage therapy, or understand the value of massage, they won’t access this valuable aspect of health care. Therefore, we might conclude that discounting may provide access to health care that may have been out of reach for some people in the past.

Every day, the public makes decisions about where to buy products or services, ranging from “dollar store” to “department store” to “designer store.” With each category there are expectations of quality and perceived value. By discounting, we are trying to attract clients to our clinics for the dollar-store value, provide designer service and hope that our interaction has sufficient value to have the clients return and pay the designer rates.

After considering everything above, I am neither strictly for, nor specifically against, discounting on a small scale. I believe that if a therapist uses narrow parameters with his/her discounting, it could be a very effective marketing tool. If, however, a therapist or a clinic needs to continuously offer discounting to its clients to keep bodies on the table, the market is telling you something about your business (whether it be your location or your treatments) and you might want to consider taking a step back and evaluating what you are offering.

Consider using an outside consultant for an evaluation and to get an impartial outside opinion on how effectively you are conducting business and how effectively you are interacting with your clients. A consultant may be able to offer suggestions to make your business more profitable and eliminate the need to offer your valuable services for a fraction of what they are worth.

Receipts and Handling Coupons
Be cautious when you are issuing receipts for the redemption of discount coupons or vouchers.  There are guidelines set out by Canada Revenue Agency regarding what must appear on your receipts especially if you are GST/HST registered.There are also guidelines set out by some of the regulatory bodies (e.g. CMTO and CMTBC), specifically that a receipt must accurately reflect the transaction that occurs that day.  Since there was no financial transaction for these arrangements, they must be handled the same way as a gift certificate, $0 value.  Due to this, clients may be denied reimbursement when they submit their receipts to insurance.

Andrea Collins, RMT, has been a massage therapist for over 12 years. Andrea has worked in a variety of settings, owned her own clinic and now practises from her home. Andrea has created techniques and business workshops to help therapists expand their practice and will be teaching the business course at a private massage college starting in January. She is currently working on a business book for RMTs that is due out this year. For more information about Andrea please visit www.haltonholistichands.ca.