Pricing salon services correctly is vital! Even just a one percent improvement in pricing can result in an eleven percent increase in operating profit. (Harvard Business Review study)
Did you know that “price” is one of the 4 P’s of Marketing?
- Product – includes both goods and/or services
- Price – the cost assigned to a good or service
- Place – where the item can be purchased, how it is distributed, etc.
- Promotion – marketing, advertising and other activities that lead to sales
Also known as the “marketing mix,” each of these is impacted by both internal as well as external factors. For instance, when pricing salon services, you have to consider internal factors such as the cost of products and time needed to complete the service as well as external pressures such as local economics and demographics, and competitor pricing for the same or equivalent services.
To further complicate the process of pricing salon services, there is more than one way to develop your salon’s pricing model.
- Cost-based pricing – pricing salon services based on all of the costs incurred (supplies, products, and percentage of equipment, furnishings, rent/lease, taxes, etc.)
- Value-based pricing – pricing salon services based on what consumers are willing or expect to pay – consumers’ perceived quality or value
Pricing salon services without considering all potentially relevant internal and external factors is important. If the cost of services at your salon is out of alignment, you might find it difficult to effectively promote and sell them. Conversely, if underpriced, you could be leaving money on the table or undermining profitability. Here are four things that should impact pricing salon services.
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4 Things to Consider when Pricing Salon Services
Costs – For your salon to be profitable, a myriad of costs should be reflected in pricing salon services overall, as well as individually, including both direct and indirect costs.
Individual / direct costs:
- Time – how much of your time is needed for the service appointment
- Products and supplies – all products or supplies consumed to complete the service
Overall / indirect costs:
- Education – the cost of education to become and to remain a beauty professional (past and future), and to continue to develop new skills
- Equipment and furnishings – what did it cost to furnish and equip your salon, and what future investments will you need to make?
- Promotional – advertising, marketing, graphic design, collateral, etc.
- Operational – overhead such as lease/rent/mortgage, payroll, licenses, utilities, taxes, cleaning costs, and other expenses required to operate a business
Knowing your numbers is so important! If you only price services based on time and products used, you may not be charging enough to offset operating costs, let alone enough so that you are setting aside money toward the future (education, repairs and remodeling, expansion, etc.) In addition, remember that most costs change over time, generally increasing year over year in many cases.
Demand – Some salon services never go out of style, others may change seasonally, come and go as trends, be more or less popular based on regional demographics, and so on.
If demand for a specific type of salon service is high but your pricing is lower than perceived value and/or competitor pricing, you could be leaving money on the table.
Conversely, if there is little or no demand for a specific salon service it might be time to take it off the menu and see if there is a more desired service that could be added.
Competitor Pricing – Do you know what competitors are charging for the same or generally equivalent salon services? How does that impact your pricing – and should it?
For consumers doing research, price is often one of their first impressions. Prospective customers will mentally compare your prices with those of other options they consider to be relevant (within the area they are willing to drive, in neighborhoods to which they are willing to travel, the type of salon brand that fits them, recommendations they may have received from others, etc.)
Value – If your salon services are priced higher than your competitors, how can you differentiate them so that clients perceive that the value they receive from doing business with you is (a) “worth it” and (b) superior to services of your competitors?
Price perceptions work both ways! Conversely, if your salon services are priced lower than many of your competitors, what are you doing to ensure they view the quality of your services as equal to (or even better than) the services they could receive by paying more elsewhere?
How are you gauging customer satisfaction? Low levels of client satisfaction in general, or relative to a specific aspect of your salon, represent opportunities for you to increase satisfaction and, in so doing, improve and increase the value which clients place on your salon services. High levels of client satisfaction might be a signal that you could improve profitability with a price increase across the board or on those services which client perceive as having the highest value.
When pricing salon services, your MRK Beauty Consultant can be an invaluable resource! They have a wealth of knowledge about salon services in general as well as in your area, including competitor pricing. They have the know-how to help you improve and increase client perceptions of value based on services, outcomes and the overall client experience.
If you are a beauty professional in Washington, Oregon, Idaho or Montana, we invite you to get in touch with your regional consultant and find out how MRK Beauty can help you grow your salon business from where you are today to where you want to be.