Pricing is a balancing act between your client’s needs and your salon/spa’s needs. It’s the place where money (balancing revenues and expenses) and marketing (attracting and keeping clients) meet.
your prices to be acceptable to your clients and give them a sense of value received. At the same time, your prices must give your salon/spa enough revenues to cover costs and give you the profit you’re looking for. Pricing is a craft as much as a science. Why? Because, even though every one is searching for the “perfect” price, no one has found it. Every company, no matter how large, has a tough time with pricing. The difference between the large companies and smaller ones is that the smaller ones usually don’t do their homework. Maybe that’s one of the reasons they’re small! One of the things we do know is pricing is inversely related to revenues, meaning when your prices go up, you can expect to sell fewer products. If you reduce your prices, you can expect to sell more products. Beware, this relationship is not what the math geeks call linear, meaning a 10% increase in prices doesn’t necessarily mean a 10% increase in sales. When it comes to pricing, there are many factors at play. The bottom line is you need to take a holistic business approach to it. You’ll also need a structured way to look at pricing, and as part of that system, you’ll need a way to calculate the impact of your pricing decisions. To work on your pricing you’ll have to know the following.
- Price per unit (service or product)
- Number of units sold
- Your variable cost per unit (cost of goods, cost of labor)
- Total fixed expenses
Then you create a “where we are right now” based on your salon/spa’s recent history (the science). Next, you create “what-if” scenarios (here’s where the craft comes in). This is where you ask yourself questions such as:
- What if I raise our prices by $X per unit?
- What if I wanted to spend additional marketing $ that will generate Y% of additional sales?
- What if I cut my variable costs by V% or Z$ per unit.
We use a “Power Guidance Salon/Spa Pricing Tool©”, which by asking these questions, you simply plug in variables and the tool will give you the results. Thus, you’ll be able to see the financial consequences of your decisions before you implement any new pricing strategies. To find out more about how we can help, visit us at thebeautyresource.com. Remember that pricing always depends upon your knowledge of your salon/spa and the marketplace.