The Greatest Threat In Your Business.

By Kym Krey

It’s been a challenging couple of years. Just when we were all trying to get back to work after Covid lockdowns and recruit the handful of qualified staff left who had not gone to rent a chair, convert their garage or lease a salon suite, we were hit with 13 consecutive interest rate rises forcing the cost of almost everything we buy beyond our reach.

Add to that the constant reporting from media outlets on the perils of the ‘Cost of Living Crisis’ and soaring inflation, and it’s easy to think that the greatest risk to our business is the economy- i.e. whether clients are confirming and spending or cancelling and pushing out their appointments.

However, when we take a moment to look beyond the emotion and into the data, we see quite a different story, which, I believe, indicates that the greatest threat to your business is… inside your business!

Let me explain:

Earlier this year, Commbank released a study into the spending patterns of Australians, comparing 2023 spend against the same period in 2024 by age group. (See Chart)

From this report, we can see that our client base is falling into one of 3 categories:

1. Over 60’s: Known as ‘The Grey Dollar’: They’ve paid down their mortgage (or are mortgage free) and are directing these funds towards superannuation and retirement investment. Having ‘done it tough’ for most of their earlier lives, this generation are now the most financially established and least impacted by the cost of living issues plaguing younger demographics.

Additionally, having ‘gone without’ and sacrificed for most of their lives, they are now determined to enjoy their later years. If not now, when? They are, in fact, resiliently outspending inflation!

Her thinking: “I’ve worked hard all my life. If I want to treat myself to quality haircare or skincare, I damn well will!”

Interesting fact: This segment is actively looking for quality services and experiences but is reporting it more difficult to find, because WE are bringing the doom and gloom beliefs. In their eyes, we are complaining that ‘It’s so quiet. No one has any money’ while they are standing there, credit card in hand, looking for our attention!

2. Late 30s to late 50’: The mid-lifers: This segment is well established career wise and is earning well plus prioritises their grooming, appearance and wellbeing, however, many took advantage of 2020’s historically low interest rates and upgraded their homes (Remembering Reserve bank governor Philip Lowe telling us that interest rates wouldn’t rise until at least 2025!) and as interest rates kept soaring, their budgets got tighter and tighter.

They’re still spending slightly more than last year but less than the rate of inflation and they’re being very discerning.

Whilst this client still prioritises her hair within her budget, because she is also accustomed to spending on a regular facial, nails, pedicure, massage, a new outfit, new shoes, eating out and weekends away, and is now forced to choose which of these indulgences stays and which have to wait, when she receives your confirmation text, the question she needs to answer is not ‘Can I afford this?’ but ‘Am I willing to give up my facial for you?’ or ‘Would I go without my house cleaner for 2 weeks to prioritise my hair?’

Rather than a question of affordability, this is a question of priority- which comes down to her emotional connection to your brand experience- and that is something you can control. It’s about which she loves more; which experience she values more highly.

Tip: Master your guest experience to such an extent that when she taps her card and leaves your salon, she’s thinking, ‘Wow! That wasn’t cheap, but it was worth every cent! Things would have to be pretty bad for me to go without that!’

In summary, for this client, great hair is not enough. She needs to feel your expertise focused on her and personally tailored to her (by inspiring her with new ideas each visit, spotting and addressing things that can be improved about her hair sharing your knowledge, hints and tips, one-onone personal-trainer-style, to ensure she no longer struggles with those issues.

Summary: She doesn’t want just a great hairdresser, she wants a high-level professional who offers a far superior experience to other (cheaper) salons, and if she gets it, she’ll prioritise you. If she doesn’t, she won’t.

3. 20 somethings: Our youngest client demographic falls into 2 groups: (i) those working but still at home without the ‘big’ responsibilities of a mortgage etc yet and (ii) those with young families, stretched to their financial limit to cover their ever-increasing mortgage + the myriad of other bills they juggle each week. Both groups have cut back severely on their discretionary spending, showing they are the hardest hit of all age groups (spending less than last year).

i. Group one (no mortgage), you might only see twice a year, but when they come in, they’re quite happy to spend enormous amounts of money for the ‘in’ highmaintenance blonde look on Instagram. ii. Group two (young family), with budgets stretched to the max, it’s not a question of nails or hair but a question of electricity bill or hair or groceries or hair, and so these are our most impacted segment.

So where is the threat?

Here’s the thing….. when you think about that most-impacted group of females in their twenties, who does that remind you of?

YOUR STAFF! So, our stylists; the ones we trust with caring for our most precious clients are also the most financially strapped, according to the data. And that will impact how they’re thinking and the care they’re giving.

Example: Shelley works for you. She is a 22-year-old newly qualified stylist living out of home and juggles rent with allllllllll of the bills, scraping together petrol money to get to work until she gets paid on Monday. When Shelley is looking after Veronica, your 63 year old regular client, Shelley can’t help but think; “That product is $80! I can’t recommend that! She’s already spending $400 on her hair! NO one can afford that!”

Because Shelley wouldn’t prioritise that spend herself, she makes the decision on behalf of her client that she will not recommend that product solution. As a result, Veronica, your loyal client spends her $400 and goes home to struggle with her hair, researching hair product tutorials on You Tube and being drawn into Chemist Warehouse catalogue specials.

The distinction we need to help Shelley to make is that, when she comes to work, she is not Shelley the 22 year old young stylist; she is Shelley the highly skilled professional stylist. Her clients are placing great trust in that Shelley and paying significant amounts for her expertise … but are not getting that expertise because Shelley’s own money stories are getting in the way.

Even though it is quite understandable that Shelley feels a little pang of nerves when she thinks of prescribing that $80 product, what we need Shelley to do is separate her OWN situation from her guests. We need her to feel the nerves and share her knowledge anyway, because that is what her client is trusting and paying her to do. She must place her responsibility to her client above her own comfort zone for those few minutes while she commits herself to delivering the personalised expertise her client is craving.

So, it’s never a question of ‘Will I recommend that?’ because there is simply not a choice. We have a duty of care to deliver our promised level of service. The prescription (the sharing of her knowledge for her guests’ benefit) is an essential part of the service experience- not optional. This is an act of giving from a commitment to being ‘of service’- not of trying to get something from their client.

So, the biggest threat in your business today is allowing your staff’s (quite understandable but still dangerous) money mindset to get in the way of the service they’re delivering to your clients.

Remember, that for many of your clients, even if they are still prioritising their spend with you, that $400 is more precious to them today than it likely ever has been, so their expectations are higher than ever before. They will be less tolerant of average service experiences if they’re paying out precious cash.

2/3 of your client base is still willing to prioritise your services within their budget IF your experience is worth the spend to them (according to the data). It’s now about so much more than being a good hairdresser and being nice to clients. They now expect a far more personalised and prescriptive experience than ever before.

Your staff need YOU to guide them through this time, keeping guest experience at premium levels. Acknowledging that whilst it is quite understandable for them to hesitate at the thought of buying an $80 product themselves, it is NOT OK for them to prioritise their own comfort zone above the needs of their paying client by removing that option for them or making that decision for them.

Their prescriptive, personalised recommendation is as much a part of their service fee as the foils or cut they’re charging for.

It’s essential that it is delivered for every client, every time.

Kym Krey is a highly experienced and trusted salon industry business coach and leadership mentor. She’s been where you are and has the runs on the board to help you get real results. If you’re ready to turn your business around, become a better leader, take that next big leap, or scale to a million-dollar turnover and beyond, get in touch: kym@kymkrey.com.au; @kymkrey or www.kymkrey.com.au