BUSINESS
“Mastering Pricing Strategies in the fluctuating economy” By Chrissy Alger Is there a little ping of anxiety in your gut at the moment when you think about a price rise in the current economic climate? Hello everyone, I am Chrissy Alger - Senior Coach for The Zing Project and Salon Coaching… I am a Salon Owner, Salon Marketer and Salon Coach having successfully run my own Salon business from start-up- NOT as a technician and purely as someone addicted to business… I am actually a Psychologist, who decided to do something different and venture into the salon industry space under the guise of wanting to do more to promote health, wellbeing, and self-confidence (all the things we get when we spend time in a Hair or Beauty Salon). In this article, I want to help you navigate the pricing challenges you may be experiencing during the fluctuating economy. If you are in any of the industry groups right now, or even experiencing this in your own business, you will understand that at the moment it doesn’t seem ‘business as usual’ at all…. Here are my thoughts for maintaining a profitable service menu… Economic fluctuations often lead to anxiety among salon and clinic owners, sparking the question: How can prices be adjusted without triggering negative client reactions? I want to outline my experiences of the gap between perceived and actual reactions to price hikes, in the hope this might instil some confidence to take action. At the moment, if you have not undertaken at least TWO (yes two) pricing increases in the last 12 months, it is highly likely that your cash flow is taking a hit. **The Mindset Shift: Conquering ‘The Story’** In all of my experience, the story behind ‘what if……’ normally is so much more aggressive and traumatic than the actual reality of what occurs when you actually put your prices up. I have mentored hundreds of salon owners through pricing increases, including some very nervous nellies. Their fears of ‘what if the client gets really angry and doesn’t come back?’ often never comes to fruition. For the couple of ‘Karen’s’ that do have something to say about your price increase, consider it a form of natural selection when she omits herself from your business. You don’t want these people in your business. Your ideal clients want to see you win, and will have an understanding (especially in this climate) that you need to do 56
Beauty Biz Year 16 Issue 5
what ALL businesses are currently doing, and have always done, is adjust your prices to ensure you can provide a high-quality service. Pricing Strategies…. Do I always have to price increase to protect my profit… Well, No….
1. **Standard Price Increases:**
Cost fluctuations impact profitability and because none of us are in business as a hobby it is necessary to make adjustments to ensure that you are making money. I am totally against the ‘standard 10% or 5%’ increase each year. You need to calculate your services costs (variable, not fixed costs) and ensure you are priced at a level that ensures your cost of goods do not exceed 30%. This is not about checking what the salon down the road is doing for pricing, it’s about looking at your own position and making informed choices based upon your expenses.
2. **Bundling with Value:**
Bundling services offers you the opportunity to create packaged ‘offerings’ that include everything your client needs for a particular service. For example, you might create a bundle that offers ‘The Balayage Blonde’ and this has a list of inclusions that would typically be included in that service. The idea is NOT to bundle these inclusions in a discounted manner, but more so as a value-driven approach. What we mean by ‘value driven’ is that clients would much rather select an ‘all inclusive’ package, than have you itemise ‘blow by blow’ every step they might need to achieve their styling result. By offering deluxe/ all-inclusive versions that include additional ‘value based’ benefits, you can also rebrand and repackage services, effectively concealing price hikes while providing added value. The key to this strategy, is NOT to discount the offering due to including a range of extras, just cost it up as you would normally and maybe throw in a few extras that don’t cost you a lot of money to include.
3. **Strategic Service Removal:**
Facing challenges with low-profit services? If you
are not sure what your low profit services are, the first step would be to analyse individual services’ profitability. Sometimes it makes no sense to continue to offer low value services that are not really making you any money; therefore, you need to weigh up whether removing them from the service menu all together would be the best way to move forward.
4. **Cost of Goods Review:**
The cost of your service provision is known as a ‘variable’ cost in the land of finance, simply because it can vary! Wages go up, Super increases, cost of goods also increase and whilst you do not have control of all of these factors, you definitely can manage your cost of goods. This might include reviewing where you purchase consumables or certain professional use products and seeing whether you can source a cheaper alternative or buy in bulk to reduce the unit pricing. A reduction in the cost of your goods, obviously increases the profitability of that service. So, make it a practice to review your cost of goods on a regular basis to see if you can reduce these expenses. I once had a client look at her laundry bill and estimate it was costing her nearly $2 a towel to be laundered! She was able to investigate more cost-effective measures and get this down to 50c a towel- that actually makes a big difference in the scheme of things! So, make a date, and review your cost of goods on a regular basis. Do you need some help in creating a profitable service menu? I would love to help you. Book a support session with me via chrissy@zingcoach. com.au. Or for more salon strategy, listen to ‘The Salon Hustler” podcast on all your major podcast platforms and follow me on Instagram; @chrissyalger_zing and Facebook: @chrissyzing..
