WSJ: What about Bobs?
“Dear Andrew ~ I continue to be so happy that I am on your subscribers’ list! I just love your thoughts, and how you express them! This pricing lesson is the most perfectly pitched wisdom on the subject I’ve read in a really long time. I’m planning on forwarding it to many of my clients and just telling them to substitute “salon” for “fitness studio/kitchen remodeling/fire safety contractor/chiropractor/ or lingerie shop”. Brilliant!”–Larry Heiman, E-Myth Coach
When business is flat or down, the knee-jerk reaction of most salon owners is to run a special or drop prices – and what happens is they dig
themselves a deeper hole to crawl out of – a hole that can both pummel profits as well as permanently damage a salon’s reputation.
Busy Salon owners know that pricing salon services is an integral part of a salon’s business strategy. Pricing, along with a host of variables – the decor, the look of your team, your selection of retail products, as well as your online presence, helps you define not only who you are but the type of clients you both want to attract.
And when it comes to pricing the question is “what prices should we be charging to create the type of business I want to own?” For sure, the ultimate objective is to maximize the amount of profit your salon makes. It’s on the way to profitability that you can use pricing as a strategy.
However, before making pricing decisions it’s important to wipe your mind clean of these four big pricing myths – because if you hang onto them, you’ll dilute any advantage that a pricing strategy will bring to your salon.
So what are these four pricing myths?
Myth #1 – Price is the client’s most important buying criteria. Ok we know that price is important; however it’s not number #1 on consumer shopping surveys about what’s important to them – for that matter it usually comes up at #4.
Of course there are people who buy based strictly on price. The question you’ll want to answer is do you want them in your salon?
Myth #2 – You have to match or even
slightly under-price your services in a competitive market. With so many different ways of differentiating your salon I’m astounded that salon owners are even thinking this way.
Instead of just competing on price you could:
Myth #3–Pricing just involves taking the cost of your services and marking it up by your desired profit margin. Unfortunately too many salons don’t have a handle on their true costs – so even if they wanted to do what is called “cost-plus” pricing, they couldn’t.
Myth #4–If your sales are down just drop the price – and the sales will increase. Remember that people put a high value on quality as well as on price. In the salon business, perception is reality – so by lowering the price you’re chipping away at the perception of your quality.
Yes, there are ways salon owners can justify lowering prices – but only if you can retain the clients once you have them in the door – and introduce them to other services and products.
However by lowering your prices to increase sales you could very well be accelerating your losses.
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