Why daily deals are bad for business

I really dislike all the “daily deals” websites. I feel they are a terrible way to market your flight school. They train your customers to devalue your product. In the flight training business, your margin is razor thin already. Daily deals websites would like you to discount your product 50 percent or more and then split the revenue with you. Taking half of the money but leaving you with 100 percent of the fulfillment costs. In the typical “discovery flight” this could leave the flight school holding the bag for up to a loss of $90 per redemption. Any way you slice it, that is a high cost to acquire a customer.

Admittedly, our school tried it once with our simulator. I felt I could leverage the low operating cost of the simulator against the high discount and revenue sharing. The result was mixed. The simulator has about $10 per hour in operating costs plus the significant cost of the simulator. So if we ignore the cost of money to buy and keep the sim, we add the labor expense of the instructor, plus an overhead charge to pay for the operation of the flight school. (we still have to pay to have the lights on, pay someone to answer the phone and schedule the simulator ride, the expenses go on and on). There is a cost of $53 per hour to operate the sim. That is $10 for the sim, $25 for the CFI, and a $18 overhead charge. So we retail this experience for $155.00. The deal site wants to discount it to $50. We will get $25 per deal. So you can see we will be in the hole $23 per redemption. Even if I subtract the overhead charge we are in the hole $5 per redemption.

The promotion ran and 91 were purchased. About 50 are actually redeemed. So you might think if you do the quick math that we broke even on the deal, maybe even made a couple of bucks. You would be correct. However, the problem is revealed in the statistics of the redemptions. Of the 50 redemptions the average age was 15.4 years old. Six redemptions attempted to stack. Which is to say they showed up with two coupons and wanted twice the service. (which we prohibited on the coupon but people try anyway). Two redemptions were current customers who expected to use the coupon for flight training. (Which we also prohibited on the coupon). Finally there were zero conversions to a student pilot, zero enrollments in our Private Pilot Ground School and one conversion to a discovery flight. Also a loss leader.

On the surface, I feel like I am emphasizing the negatives. There is a diamond in the rough. The average age was young, a mere 15 years old. This means kids are still interested in airplanes. A response like this, while not producing immediate sales, makes an investment in the future whose returns are long term and not measurable on the balance sheet.

Here is the thing that bothered me the most. The purpose of any marketing promotion is to generate traffic in hopes that profitability will follow. When the coupon deal salesperson was making her presentation, she emphasized the fact that not all coupon sales would result in redemptions. That slack could be depended on to make the deal more profitable. Without redemptions I never get the chance to create a student from that redemption. Ultimately that is what a flight school wants: students.

This is an article from inbound marketing with a similar story. If you chose to do a coupon deal please do so with great caution. Know that a airplane ride as a part of the deal could be financially worse. Know that many of the redeemers will be chasing the coupon and not necessarily the opportunity to enroll in your school.

–Louie Hilliard, president and chief flight instructor at Hub City Aviation, a 61/141 flight school in Lubbock, Texas

This post originally appeared on Hilliard’s blog, Flight School Business Success

Where are the instructors?

No matter where in aviation you look, it seems the hot topic is making new pilots. Or that the pilot population is aging. We, as pilots, need to hurry up and make more before our airports all disappear.

I own a small flight school in Massachusetts called FCA Flight Center operating out of Fitchburg (KFIT). For us, the problem surely isn’t new students, it’s getting CFIs to train them. There seems to be a larger hole in CFI ranks than in students. I’ve searched high and low all over the Internet with no luck, including a website designated for CFIs to job search. We currently have six part-time instructors. Nonetheless, we do not have any working three days per week. The planes sit on the ground on beautiful flying days.

As far as I’ve researched, we’re the highest paying flight school in the area for CFIs. The camaraderie here is great. The competition is friendly. When the instructors aren’t flying with students, they fly together out for dinner or currency.

We also have a thriving active pilot’s association on the field with more than 120 members. The Fitchburg Pilots Association EAA chapter 1415 has monthly meetings with anywhere from 50 to 200 attendees. CFIs and pilots here have no trouble making friends.

Once the CFI issue has been solved and flight training is being provided properly, we have two items left I can see to bring GA over the top. First would be to provide help to all airports to have a thriving pilot’s association. We need leaders to bring them together. That’s when pilots fly more and fly safe. Next would be marketing. General aviation fails tremendously in this area. Just try telling someone not in aviation you’re going to Oshkosh, Wisconsin, for a week in July and you’ll see what I mean. It’s the best kept secret in the world. Boats, motorcycles, and even gun clubs market themselves better than we do. It’s about time we ask our friends like Harrison Ford and Morgan Freeman to help us market GA to the general public.

Charley Valera, owner FCA Flight Center