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FIVE Growth Drivers That Can Transform Your Salon/Spa
October 12, 2015 | By Neil Ducoff | No Comments
Growth doesn’t happen by accident or good luck. In business, there are Outcomes and Drivers. Outcomes are measurements and scores of the company’s ability to execute. Drivers are the mini-engines that work in unison to deliver the energy to produce the desired outcomes. The better you dial in the Drivers the more impressive the Growth Outcomes.
Here are the top five Growth Drivers that, when dialed in, can deliver next level growth beyond your wildest dreams:
Driver 1 … Productivity Rate:
In a service business, you sell time. You buy that time in the form of payroll hours. The more hours you buy from employees, the more inventory of hours you have to sell. The total of all salable hours for a day, week or month represents 100 percent of your inventory. The more focused and strategic you are at buying and selling hours, the higher your productivity rate. The optimum productivity rate target is +/-85 percent. If your total productivity rate is running below 70 percent, you’re buying too many hours because you’re operating inefficiently and not producing enough demand.
RECOMMENDATION: Productivity must be relentlessly managed daily. Schedule hours to match customer demand. Never buy hours you can’t sell. Expedite the training and ramping up of new staff by developing expert level skills in the most basic services first. If your extended training program for new talent is plagued with turnover – it’s too long and needs to be condensed. Lastly, make it your company’s battle cry that, “Everyone is responsible for every hour that’s available for sale … in all columns on the appointment book.” This is the cornerstone of the Team-Based Pay business model and something that commission fails miserably at.
Driver 2 … Referrals:
Referrals are the “brass ring” of the salon industry. A salon can spend a fortune on advertising and time working on Social Media … but the truest and most significant source of new business is through existing clients referring friends, family and co-workers to their favorite salon. Referrals are earned each and every day, not just by service providers — but by all staff members, including front desk/guest services and anyone that has client contact in any form. Yes, a great haircut and color is key, but an indifferent and grumpy employee at the front desk can turn a possible referral from an elated client into a review that sounds like, “Great haircut and color … but rude treatment at the front desk.”
RECOMMENDATION: Create a company Code of Conduct that states, “Everyone is responsible for creating extraordinary client experiences.” It should include all service providers whether the client is in their care or not. It should include front desk, guest services and call center staff, as they are the frontline of creating and maintaining every client’s experience from phone, to check-in to check-out. It should include shampoo assistants, apprentices and housekeeping staff. More than anything, earning referrals is a team sport. Anything less is a compromise.
Driver 3 … Rebooking:
Rebooking is “Salon Business 101.” Haircuts grow out. Hair color grows out. One facial or massage doesn’t fix skin issues. To complete an otherwise perfect professional service and not give a client the recommended maintenance cycle — and rebook the client’s next visit or two — is simply allowing growth opportunities to walk out the door. Rebooking is THE most potent Growth Driver because it feeds two other Critical Numbers … Productivity Rate and Client Retention Rate (First-time and Existing).
RECOMMENDATION: All it takes to drive impressive rebooking numbers is a system that links stylists to check-out at the front desk. The stylist gives the client a verbal and written pre-book maintenance cycle with the next visit date … and that goes to guest services at check-out. Guest services says, “[stylist’s name] recommends that your next cut/color be done on [date]. Do you prefer the morning or afternoon?” That’s all there is to it. The one phrase that should be banned from the rebooking process is, “Would you like to book your next appointment?” That’s a YES/NO answer.
Here’s a screenshot from a Strategies coaching client who uses Millennium that shows a rock-star rebook rate of +/-90 percent. In the bottom left “Rebook” box, you can see that this salon had an 87 percent rebook rate for the month of February 2014. Out of 804 client check-outs, 699 clients have rebooked a future appointment. Bravo to YOU Salon in Ellicott City, MD. YOU Salon is a Team-Based Pay company and consistently achieves +/-90 percent rebook rates.
Driver 4 … Client Retention Rates:
There are two measurements to Client Retention. The first is the conversion rate of first-time clients to a second visit. First-time client retention rate is the ratio of the total number of first-time clients in a specific month that return within 90 days from the end of that month. If you average 100 first-time clients a month and 35 of them return within 90 days, you have an unimpressive first-time client retention rate of 35 percent. This means that 65 percent of first-visit clients were not impressed enough to return. What does Strategies consider impressive? Impressive is 50 percent or higher. Rock star status begins at 65 percent.
The second measurement is Existing Client Retention Rate. This is the ratio of how many multiple-visit clients in a specific month return within 90 days from the end of that month. If you average 1,400 existing client visits a month and 1,190 return within 90 days, you have an acceptable existing client retention rate of 85 percent and a client base attrition rate of 15 percent. In this example, 210 existing clients failed to return.
RECOMMENDATION: Retention rates are a direct measurement of how well your customer service and experience systems are working. If you have a low number of first-time clients per month, a first-time retention rate below 35 percent, and an existing client retention rate below 85 percent … red warning lights are flashing and demanding immediate and decisive action. It’s time to totally rebuild your phone scripts, front desk/guest services procedures, consultations, service conclusion procedures (recap, recommendations for service and retail, and rebook). Any service providers with low first and existing clients retention rates must be retrained. If retention rates are seriously ugly, they should be on your competition’s payroll.
Driver 5 … Retail Recommendations:
Ever since the 1970s when professional product retailing became mainstream in salons, the, “I’m an artist — not a salesperson” excuse to growing extraordinary retail sales has plagued the industry. The truth is, historical approaches to selling professional products in salons just don’t work and actually feed frustration. Retail commissions motivate the few, not the many. Too many stylists just opt out of the retail game. Front desk staff can’t close sales without recommendations. The result is that mass quantities of clients are walking out of salons with great hair and no professional products to maintain it. That’s why the vast majority of salons struggle to get retail sales over 10% of gross revenues.
The standard routine is for salon owners to set retail goals of approximately 10% retail to service sales. They measure the results and the results are typically the same; two out of ten stylists recommend and sell retail while the eight out of ten do little to nothing. For an industry that loves its professional products, it is incomprehensible why the simple and professional practice of conducting a rather straight-forward “This is what I recommend for home care …” process meets with such widespread stylist indifference.
RECOMMENDATION: Tracking a stylist’s retail sales percentage and average retail ticket is essentially tracking “the outcome” and not “the driver.” The driver that creates impressive retail sales is the number of verbal and written retail recommendations going with clients to check-out where guest services can “close” the retail sales and rebook future services. Track each stylist’s verbal and written retail recommendations that go to check-out and you’ll be tracking the real driver of retail sales. Strategies has a simple system called “The Happiness System” that accomplishes this task. Click here for information on The Happiness System, contact Bruce Hourigan at 800.417.4848 ext. 203.
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