20.0%
Contractual (active opts)
$134,274
Combined GB Q1'26
1 Current Deal Structure
Couples Deal (avalon-day-spa-6) — $122,660 GB, 91% of revenue
| Option | Sell | List | Discount | Merchant Gets | Margin |
|---|
| 60-Min Swedish/Deep Tissue Couples Massage w/ Hot Stones for Two | $119.00 | $170 | 30% | $95.20 | 20% |
| 60-Min Couples Massage w/ Aromatherapy & Sea Salt Foot Scrub for Two | $148.68 | $236 | 37% | $118.94 | 20% |
Solo Deal (avalon-day-spa-5) — $11,614 GB, 9% of revenue
| Option | Sell | List | Discount | Merchant Gets | Margin |
|---|
| 60-Min Swedish or Deep Tissue Massage | $59.00 | $85 | 31% | $47.20 | 20% |
| 60-Min Full Body Massage w/ Hot Stone & Foot Scrub | $69.01 | $103 | 33% | $55.21 | 20% |
Legacy Options (not targeted for renegotiation)
Aromatherapy Sea Salt couples ($128.34) at 25%, 90-Min solo ($59) at 35% — low volume, separate legacy contracts. These remain untouched.
Problem: Active options at 20% contractual — 9pp below the Las Vegas market average of 29%. This is the highest-GB merchant in the pilot ($134K/Q) at the lowest margin tier.
Contract history: The couples deal was at 40% margin until Oct 2024, when it was renegotiated down to 20% (merchant payout nearly doubled from $63 to $87/voucher on the base $109 option). Dynamic pricing has since pushed the actual sell to $119. The merchant received a significant concession 18 months ago — any proposal to increase margin must acknowledge this context.
2 Market Benchmark — Las Vegas Massage
| Metric | Avalon | LV Market Avg | Top Comp
(Rainbow Spa) |
|---|
| Contractual Margin | 20% | 29% | ~37% |
| 60-Min Solo Sell | $59 | $87 | — |
| 60-Min Couples Sell | $119 | $145 | $128 |
| Avg Discount | 33% | 35–38% | — |
| CVR | 4.66% | 3.69% | 3.97% |
| Refund% | 7.8% | 11.1% | 6.6% |
Key insight: Rainbow Spa runs at ~37% contractual margin and generates $19K MVR on $81K GB. Avalon generates more absolute MVR ($22K) but requires 66% more GB ($134K) — a direct consequence of the 20% rate.
Price sensitivity check: Rainbow converts at 5.74% CVR at $128 vs Avalon's 5.55% at $119. Across 32 LV massage couples deals, couples price explains only 5% of CVR variance (r = −0.23). Regression estimates a −0.12pp CVR impact from $119→$128 — effectively noise. The $9 price gap does not appear to be a meaningful volume driver.
3 Proposed Restructuring — Three Options
Option A: Raise price to Rainbow level (recommended)
Increase couples sell from $119 to $128 (discount 30% → 25%). Raise margin from 20% to 28%.
Merchant gets: $92.16/voucher (was $95.20) — small cut per unit
Groupon gets: $35.84/voucher (was $23.80) — +50% uplift
Volume risk: low. Data from 32 LV massage couples deals shows price explains only 5% of CVR variance. Rainbow converts at 5.74% at $128 vs Avalon's 5.55% at $119 — the $9 gap is not driving Avalon's volume. Expected CVR impact: −0.12pp (noise).
Option B: Keep price, increase margin split (fallback)
Keep sell at $119. Raise margin from 20% to 28%. Customer sees no change.
Merchant gets: $85.68/voucher (was $95.20) — gives up ~$9.50/unit
Groupon gets: $33.32/voucher (was $23.80) — +40% uplift
Advantage: No customer-facing change. 28% is still 1pp below market.
Disadvantage: Merchant loses 3× more per voucher than Option A.
Option C: Raise price above Rainbow to merchant break-even (aggressive)
Increase all sell prices ~12% to fully offset the 8pp margin lift. Merchant earns the same or slightly more per voucher — zero pain.
| Option | Current | Proposed | Discount | Merchant Gets | Change |
|---|
| Couples Base (60-min Swedish) | $119 | $133 | 22% (was 30%) | $95.76 | +$0.56 |
| Couples Premium (60-min Aroma+Salt) | $149 | $166 | 30% (was 37%) | $119.52 | +$0.58 |
| Solo Swedish | $59 | $66 | 22% (was 31%) | $47.52 | +$0.32 |
| Solo Hot Stone | $69 | $77 | 25% (was 33%) | $55.44 | +$0.24 |
Groupon gets: $37.24/couples base (was $23.80) — +56% uplift.
Merchant gets: slightly more per voucher across every option.
Volume risk: moderate. At $133, couples is $5 above Rainbow ($128) but still $12 below the LV avg ($145). The base couples discount drops to 22% — outside the typical 30–39% sweet spot. The premium couples at $166 stays at 30% off. Solo at $66–$77 remains well below the $87 LV avg. CVR regression predicts −0.2pp impact from $119→$133 — still within noise, but less tested than the $128 price point where Rainbow operates.
- Both deals (-5 and -6) renegotiated together — single conversation covers all active 20% options under this account
- Target 28% margin on active 20% options only — legacy 25%/35% options left untouched. Still 1pp below the 29% LV market average
- Recommendation for Matt: Lead with Option A ($128, matches Rainbow — proven price point). If the merchant pushes back on the −$3/voucher loss, escalate to Option C ($133, merchant-neutral) as the win-win. Reserve Option B (margin only, no price change) as last resort — it costs the merchant $9.50/voucher.
4 Estimated Quarterly Impact
Three options compared: margin 20% → 28% across all · ~1,031 couples + ~187 solo units/Q
| Metric | Option A
(price to $128) | Option C
(price to $133) | Option B
(keep $119) |
|---|
| Couples base sell price | $128 (+$9) | $133 (+$14) | $119 (no change) |
| Margin | 28% | 28% | 28% |
| Groupon take per couples | $35.84 | $37.24 | $33.32 |
| Merchant gets per couples | $92.16 | $95.76 | $85.68 |
| Merchant change per couples | −$3.04 | +$0.56 | −$9.52 |
| Groupon MVR uplift / Q | +$13,348 | +$15,150 | +$10,742 |
| Merchant revenue / Q | −$4,040 | +$600 | −$10,742 |
Option A (recommended): proven price point — Rainbow operates at $128 with 5.74% CVR. Merchant gives up $3/voucher but gets better search ranking. Most data-backed choice.
Option C (merchant-neutral): $133 is $5 above Rainbow but still $12 below LV avg ($145). Both Groupon (+$15.2K) and merchant (+$600) come out ahead. Risk: the base couples discount drops to 22% (outside the 30–39% sweet spot), though the premium couples stays at 30% off. Less tested price point than $128.
Option B (last resort): costs the merchant $9.50/voucher with no proven upside vs Option A.
5 Pitch to Merchant
"We know you got a rate adjustment in October 2024 — we moved from 40% to 20% on the couples deal because we wanted to make this work for you long-term. And it has been working: you're converting at 5.6%, better than most deals in Vegas. But at 20%, we're 9 points below the Las Vegas market average, and that means the deal gets deprioritized in search rankings — fewer impressions, less visibility than your performance deserves.
Our recommendation: Raise the couples price from $119 to $128 and adjust the margin to 28%. At $128, you're in line with the top-performing spas — Rainbow Spa runs at $128 and actually converts slightly better, so the data shows this price point works for customers. You give up about $3 per voucher compared to today. That's the smallest adjustment we can structure — and you're still well ahead of where you were before October 2024.
Alternative: If you'd rather keep the $119 price, we can adjust the margin split only — but that costs you $9.50 per voucher instead of $3. Same 28% target either way.
We're only asking to move the active options. Your other options stay as-is. At 28%, the deal moves into a healthier tier for search ranking and visibility."