Pricing Salon Services Profitably
In the world of salon Business pricing mistakes are common, not only because of the many different pricing strategies, but because some pricing practices don’t seem to make sense on the surface. When salon business owners don’t fully explore all the ramifications of their pricing mistakes, customers can be driven away and profits inevitably drop. Dig a little deeper into why certain pricing policies work even if they seem counterintuitive by taking into account the following pricing mistakes:
Not being realistic about how much your services are worth
You probably have a lot of passion about your hair salon and what you do, but often hairdressers tie the worth of their services to their own self worth which makes it difficult to objectively determine the value of the services to the customer. Rather than setting the price based on what your services are worth to you, study market trends and research prices for similar services if the service is new my suggestion is that you would follow the guidelines of price skimming. If you are pricing your regular services then you would look at using a cost plus or value based pricing model. Just make sure to set a realistic number that is going to fit your market research and make your salon profitable. Ultimately, remember that your services are only worth what the market says they are worth; it doesn’t matter how good your service is if no one buys it because it is priced too high for the value you provide or it scares people away because it is perceived as too cheap for the apparent value.
Not researching ideal customers with due diligence
If you ask almost any salon business owners who their ideal customer is, most will respond with, “Anyone who pays.” These salon owners often price their services based on a competitor based pricing strategy and this can fail to realise a profit for the salon and can very easily end up making the salon a deficit. While this may seem like a good strategy to ensure that you are competitive within your marketplace, it ignores a niche of ideal customers more likely to purchase your services at a higher, profitable pricing point.
Avoid this mistake by determining your ideal customer. Consider what type of person you want to attract by using common sense and market research. Look for attributes such as age, sex, occupation, and income that make someone an ideal customer. Use this information to create your ideal customer avatar and keep this in mind when you set your prices and for the foundation of your marketing.
Increasing or decreasing prices with explanation
Customers notice even the smallest increases in price, most times if the price rise isn’t excessive (under 5%) the majority will accept it as a part of life taking into account such issues as inflation or increasing overhead costs. The problem comes when salon businesses that raise prices assume that they are going inundated with angry customers questioning the price rise. The assumption is usually based on the fear that customers will view you raising your prices simply to make a higher profit. If you do have the rare question from a customer just inform them that costs of doing business have increased and to provide the same level of service and expertise that they are used to, you have had a small price increase. At the end of the day don’t make an issue of it and chances are no one else will either.
You might think that lowering the prices of services would increase customer satisfaction, but in fact, the opposite may be true. Suddenly lowering your prices without explanation gives the impression that your services were overpriced, even if you changed it for an entirely innocent reason like you changed colour companies and you are now purchasing at a cheaper rate than before. It is better to use those savings to reduce or offset a price increase in the future.
Undervaluing your product
While overpricing can cost you sales, pricing your services too low can be just as detrimental to your business. When some people see a low price, they automatically believe that the service you offer is of inferior quality or value. Unless this is part of your marketing strategy and business positioning, that is being the best value or lowest priced service provider. This can increase sales without compromising the public perception of the services you offer.
Lack of growth anticipation
You can’t only base your prices based upon the cost of you providing the services; you need to consider how business costs will change as time goes on. Customer volume may increase and decrease, so you need to make sure to base your prices on these events in mind. You also need to consider how much your overhead will change as your business grows or declines. What if you need to employ another stylist? What if you have a slump in business and your pricing is based on being busy 100% of the time?
Too much complacency
The market is constantly changing, and this affects your prices. You need to be constantly aware of what services have high demand and adjust your prices to maximize profits. Conversely, services falling out of public favour may need to be removed from your service menu entirely, if no one is having a service that requires you to carry specific products for professional and retail sale to successfully perform the service as this will impact the bottom line of your business and in turn can affect your pricing formulation.
Picking fights that you can’t win
Bigger companies are able to offer low prices especially on retail items because they are given discounts for bulk orders. Furthermore, if they underprice a service, usually as a loss leader expecting staff to upgrade the customer to a more expensive service if the customer chooses to stay with the basic underpriced service they can absorb the loss with minimal harm to their business. Since you don’t have these luxuries, you need to set your prices carefully and if you do (heaven forbid) offer discounts realise you don’t have much “wiggle room” for failure; discounting can kill your business. Don’t try to compete with the big boys in the marketplace. Instead, focus on offering what they can’t, such as great, personalized customer service.
Not putting your best foot forward when describing your salon and services
The more value people think they get from your salon and the services you offer, the more you can charge for it. In order to increase this perceived value, emphasize why what you offer is better than competitors. This can be anything from more personalised attention, a unique style of cutting hair. Often this is where the critical non-essentials of your business will put you ahead of your competition. The ultimate goal is to brand your salon and your services in a way that makes it synonymous with a quality experience.
These eight mistakes you should avoid when pricing your services for your salon business are just the tip of the iceberg. There are many more strategies and considerations you need to take into account to arrive at a pricing methodology that will not only keep you competitive within your marketplace but have you performing every service at a profitable price point to keep you and your salon business thriving and successful.
If you would like to know more information about pricing for your salon I would highly recommend my book available in digital format from the following places.