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How to Fix the Leaks in Your Salon or Spa Service Pricing

November 30, 2015 | By Neil Ducoff | 2 Comments

Any discussion on salon/spa service pricing can quickly turn into a debate based on historic practices, entitlement, ego and emotions. That being said, what follows is sure to open a “can of worms” debate.

A debate is a formal discussion of opposing viewpoints where the best debater is crowned the winner. My intent is not to win a debate, but to create an awareness of the issues and practices that do more to compromise and complicate salon/spa pricing than help it.

But, if anyone wants to debate, sound business practices will beat entitlement, ego and emotional arguments every time.

As you will read, most of the service pricing issues are more salon related than spa. Why? Because there is a heck of a lot more entitlement, ego and emotional stuff that exists on the salon side of the industry. Spa pricing is more consistent across service providers … even those with many years of experience. That’s so not true on the salon side where many price levels can exist within the same salon and are justified by the size of stylist’s clientele and years of experience.

Here is my hit list of seven salon/spa pricing leaks and how to fix them:

  1. Complicated Multi-Level Pricing: If you’ve ever heard a client ask, “Why was it more/less this time?” – your clients are stuck in your commission pay system that raises pay by promoting a service provider to a higher price point. (Agreed, no business can afford to raise commission rates these days.)Unless you have a sufficient number of service providers in each price level, it is almost impossible to practice a team-service concept without the salon/spa and clients tripping over price levels. Beyond two or three price levels, it’s just too complicated. It makes the simple question, “How much is a haircut?” turn awkward, as phone staff attempt to explain to potential clients that they can choose a low price from an inexperienced service provider, or pay big bucks for the top dog that may or may not have an opening for weeks.I called a very prominent salon and asked, “How much is a haircut?” The response was, “We have a $45 available at 3:00pm and a $75 available at 7:00pm.”Huh? No further explanation on the difference in price. Not one question regarding my hair type … just two prices.Multi-level pricing distorts your salon/spa’s branding by isolating columns on the appointment book into something akin to self-contained businesses.THE FIX: Start by eliminating the lowest price level. Eliminate the next lowest level four to six months later. Continue the process until you settle in on two or three that truly represent your brand.
  2. Newbie pricing: Of course, multi-level service pricing makes it easier to charge less for inexperience and more for master level experience.But what price point does your brand represent and what is your company’s promise to its customers?If your company stands for quality, extraordinary customer service and excellence, than why are you offering clients inexperience and justifying it with a lower price? When dining at a fine restaurant, you don’t pay less because the sous chef prepared your meal.Here’s what it sounds like to newbies, “Welcome to our team … we’re going to prepare you to deliver our cheapest haircut or service.”Wow! That’s setting the bar real high. How about saying, “We’re going to put you through the most intense training you have ever experienced so you can deliver a select number of services to represent our brand and our premium price point.”Yes, you can train new talent faster … if you want to. Newbies spend too much time as assistants and apprentices because the salon/spa isn’t willing to invest the time, money and resources to fast-track their development. And sadly, newbies are too often treated as a cheap pair of hands under the guise of “gotta pay your dues.”

    THE FIX: The fact that you hired new talent is your problem – not your client’s problem. Put your brand and reputation up front and train the heck out of new talent until they can represent and deliver to your standards. Have your most experienced staff train, inspire and instill their mastery of the craft. Put ego aside and lift newbies up … rather than drag their development out to the point of discouragement.

  3. Price increase phobia: A recurring question on Strategies Salon/Spa Idea Exchange on Facebook is, “What’s the best way to raise prices?”The answers are all over the place from put up signs, send email notices, tell clients the price is going to increase on their next visit and let front desk tell them at check out.Why not just hire the Goodyear blimp to drop pamphlets?Everyone knows that the most logical solution is to inform clients when booking appointments and have service providers inform clients of the price increase at the beginning of the service.THE FIX: When it’s time to raise prices … set the date, raise prices and get it over with. Dragging out the “lets try to inform everyone so no one complains” is pointless. Guess what? Some clients are going to complain – the majority will not. You need gas and the price at the pump went up overnight … you still buy the gas.You’re a business owner that needs to make business decisions regarding price. Clients know this. If they appreciate the consistent quality you deliver, they’ll pay the new price. If not, it is the client’s choice to accept the increase or go elsewhere. There is really no need for price increase phobia.
  4. Will all clients that aren’t paying the current price please stand up?: Maybe one reason you need to raise prices is because there are existing clients that still haven’t been charged the last price increase … or two. That’s right, and you know it. There are probably clients with appointments and/or receiving services at your salon/spa that are still paying old prices.This is pure insanity and 100% compromise of your business.If you and your employees are true professionals and respect the value of your skills, experience and quality of work … then why are certain clients given the “you don’t have to pay the price increase” card?THE FIX: I’m just going to say it, “Get a new backbone if the one you have resembles a rubber snake.” Clients are NOT friends. They buy your time to receive services. When the value of your time and cost of business increases, you raise prices and they pay the increase that all other clients are required to pay.If a client doesn’t want to pay your rate – he or she is not a good client. I bet you’ll see better cash flow just by enforcing your existing pricing structure.
  5. Pricing based on assumptions: You know how much to mark up a retail bottle of shampoo based on its cost. How do you know how much to mark up a service if you don’t know what an hour of service costs?Often times owners don’t know … so they guess.It is staggering how many salons and spas set service pricing based on WAGS (wild-ass guesses) or what the competition is charging that also based its pricing on WAGS. Maybe your pricing is based on some level system you installed that has set price ranges for each level, but are those prices based on your company’s cost per hour or someone else’s?THE FIX: If you don’t know how to calculate your salon/spa’s cost per hour, schedule a FREE call with a Certified Strategies Coach and we’ll walk you through it. Knowing your cost per hour is the only way to properly and accurately set service prices to ensure profitability.
  6. Discounting away profits: During the holiday season do you drive gift card sales by offering big attractive discounts? It’s great to see all that gift card cash add up, but you may be setting your company up for a cash crisis at redemption time when the cost of fulfilling those pre-paid services is going to exceed their purchase price.The cash crisis is going to be even more painful if the incoming gift card cash was spent and not held in reserve.You’ll not only be busy fulfilling gift card services at a loss due to excessive discounting … you won’t have cash to cover the fulfillment costs. Discounting dependency kills cash flow and destroys profit. Groupons and the like are about the worst discounting practices any salon/spa can engage in.THE FIX: There’s nothing wrong with occasional and selective discounting promotions. When discounting becomes a crutch to drive sales … your service business is in trouble.Stop the discounts and focus on quality, delivering extraordinary experiences, giving value, pre-booking and client retention. As for discounting gift cards, stop the practice. It will come back to haunt you at redemption.
  7. Going for the tip vs. charging the right price: This one is extremely common and probably alive and well in your salon/spa. It’s when service providers intentionally give, and don’t charge for, services to receive a bigger tip. It’s also when service providers fail to charge clients a price increase because they think they’ll lose clients and miss out on tip income.

    THE FIX: You must have a system in place that monitors what clients are being charged for services. Some software systems can alert you whenever a price is adjusted. In a service business, educating your team on proper pricing and pricing policies is a non-negotiable.Inspect, verify and correct. Otherwise, the leaks in your pricing system will eventually sink your company.

Categories: Business Builders , Financial Literacy , Leadership , Monday Morning Wake-Up , No-Compromise Leadership , Profitability , Uncategorized

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Comments

  1. . . . WOW . . . One of your best yet Neil . . .

    In my opinion, part of this lower tier (new talent, fresh talent) pricing happened as a result
    of retail manufacturers wanting to capture the value-priced market . . .

    For us, it’s come along w/ a flurry of cling-ons . . . Interesting that so many companies are
    closing their new talent locations . . . We’ve already begun dropping the lower prices . . .

    Your column was on point . . .

    1. Much appreciated Terry.

      It’s hard to build a salon brand trying to be all things to all people with a pricing structure that says, “We have stylists on staff that are new that can’t meet our standards — so we charge less.”

      Good to hear you’re in process of dropping the lower prices.

      And ALWAYS good to hear from you,

      Neil

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