Thursday, October 22, 2009

The New Luxury Customer

If you haven't already discovered her, please make a point to visit luxury marketing consultant Pam Danziger's website, http://www.Unity Marketing

Danziger's luxury research firm just completed "A Study of the 'New Normal' Luxury Consumer Market AFTER the Recession."

Danziger was one of the few marketing experts who accurately predicted the impact of the recession on affluent consumers, the supposedly "recession proof" demographic, as far back as 2007.

I plan to attend her upcoming webinar on the New Luxury Customer on November 12.

In particular, I'm interested in the five "psychographic" profiles she has discovered in her research, and how spas might market to them:

"X-Fluents (Extremely Affluent) who spend the most on luxury and are most highly invested in luxury living. In the report you will learn how the share of X-Fluents is on the rise in the current market, as other personality types drop out of the overall luxury market.

Butterflies, the most highly evolved luxury consumers who have emerged from their luxury cocoons with a passion to reconnect with the outside world. Powered by a search for meaning and new experiences, the Butterflies have the least materialistic orientation among the segments.

Luxury Cocooners who are focused on hearth and home. They spend most of their luxury budgets on home-related purchases

Aspirers, those luxury consumers who have not yet achieved the level of luxury to which they aspire. They are highly attuned to brands and believe luxury is best expressed in what they buy and what they own.

Temperate Pragmatists, a newly emerged luxury consumer who is not all that involved in the luxury lifestyle. As their name implies, they are careful spenders and not given to luxury indulgence."

Danziger's studies are designed for luxury marketers and priced accordingly; however, even small businesses can learn a great deal from her free "executive summaries" and from hearing her speak.

Wednesday, September 30, 2009

Who's Your Gladys?

One of the highlights of my year has been the inclusion of our spa, and our customer service philosophy, in a new business best-seller, Who's Your Gladys? (American Management Association Books)

Naturally, we're thrilled about the chapter devoted to Preston Wynne Spa. But I'd have bought the book anyhow. It's one of the most solid, meaty and actionable customer service books I've come across in years. Authors Marilyn Suttle and Lori Jo Vest have done a tremendous, and remarkably mindful job of distilling customer service wisdom from an array of different businesses and industries.

As the authors remind us, "When times are tough and customer dollars are scarce, it's the companies with exceptional customer service that weather the storm. If you want to keep customers coming back and happily recommending you to others, now is the time to ramp up your customer service to the highest possible level. Even when the economy gets back on track, those with extraordinary customer care enjoy the most profits."

It's difficult to bang this drum too much. With your company in a defensive crouch, it's hard to simultaneously create the mindset of gracious hospitality.

I'm reminded of the scene in Gone with the Wind, when Scarlet pulls down her mother's velvet drapes in the devastated mansion and has a new, fashionable dress sewn up to create the illusion of prosperity for a crucial meeting with Rhett Butler.

More than a few of us have felt a bit like Scarlet this year, projecting an aura of velvety ease and abundance to our clients while slashing expenses and biting our nails behind the scenes.

But one of the things we cannot skimp on is good staff, proper supervision and effective training.

Training is not just that moment when you sit everyone down for a formal educational session. Training can and should occur every time you interact with your team, and when they watch you interact with customers. The best supervisors identify and guide their teams through the inevitable "teachable moments" that occur on the job.

The good news is that formal training is becoming significantly less expensive and significantly more accessible, thanks to technology. Wynne Business Spa Consulting has added webinars to our educational lineup, designed for both management development and employee training. They're fast, affordable (no travel, either!) convenient, and we believe they will encourage more spas to make training part of their regular routine.

We're also partnering with Coyle Hospitality Group, the wonderful Mystery Shopping firm, for a series of employee training courses. These are based on specific "moments of truth" in a spa's service delivery cycle. We're starting with the Reservations call. Those of you who have worked with Coyle know how many "moments of truth" are documented in one short reservations call.

Guess which element of a good Reservations call is most often omitted, according to Coyle? The upsell. We prefer the term "optimizing," because far from simply being a way to extract more money from a guest, this process is a way to showcase your expertise. Optimizing a guest's services increases the possibility that a guest is going to get exactly the treatment they want and need, and the results that they desire. That increases the possibility that they'll be delighted, and return again and again.

If a guest is habitually relegated to your base sticker price, plain vanilla offering, they may not comprehend that there are other fabulous options on your menu. (Yes, you spent hours writing it, but most customers don't spend hours poring over the menu.) It's our reservation team's responsibility to guide them toward the best treatment for them. It's more than upselling, it's good customer service.

How do they "get" this? Indoctrination. Education. Demonstration. Repetition.

Hearing it done right, over and over again, is key. Does this get tedious? Um, yes. Your spa must be willing, in restauranteur Danny Meyer's words, to use "constant, gentle, pressure" to ensure that team members adhere to your service standards. And honestly, it's not hard.

You just can't be lazy.

The companies chronicled in "Who's Your Gladys?" share this commitment. It takes different forms in different companies, but maintaining high service standards is a core value and it comes from the heart. It doesn't waver because the winds of recession are howling outside. It's not about giving "just enough" to get by while things are tough, or allowing team members to slack off because you feel badly that their pay has been reduced.

It's certainly not about chopping away at the little things your customers appreciate. They'll never forgive you. The dollars I could save by not providing granola bars and tampons would be met with an "equal and opposite reaction" by our clients. (Yes, we have a few tricks--arranging fewer of these items in smaller containers, to making grabbing a handful and stuffing them in a handbag feel conspicuously greedy.)

Businesses that want to emerge on the other side of this economic swamp must give even more than they did before. Yes, some customers are raising their pitchforks and torches over the tiniest mishaps these days.

When these moments occur, remember Holly Stiel's words of wisdom: "Being Right is the Booby Prize." Smile. Dig down. Give more. It will only hurt for a minute.

See you at ISPA!

Speaking of this amazing customer care guru, don't miss Holly's amazing new presentation at ISPA, SILK: Service in Loving Kindness. It will rock your world!

Thursday, September 3, 2009

Customer love can't stop now: donation strategies that work

I overheard the donation-request conversation at the front desk of our spa and introduced myself with a warm handshake. Nervously, our customer described her back to school night event, which would include 500 affluent families in our town. She was the new President and hated doing "asks." She apologized several times for the imposition.

Her idea was to have a quick drawing at the beginning of her two PTA meetings (on consecutive nights) and award a $25 gift card to one parent in the audience. Her vision, she said, was to help participants feel more "cared for" by the organization. Oprah style, the gift cards would be attached underneath chairs. She would draw one winner each night.

Her request was incredibly modest.

"We're not going to give you two $25 gift cards," I began, as she shrank back in dismay. "We're going to do something better."

First, I described our Community Investment Program which is a system we've created to both manage donation traffic, which can be very disruptive in a small business, as well as provide a new model for fund raising that conserves volunteers' valuable time.

As a non profit board member myself, supporting a terrific domestic violence agency I believe that event-driven fundraising has its place, but it's also too often a fire drill. Small businesses get fatigued by being constantly asked for donations. Volunteers, like this poor woman, get burned out. An organization can erode its base of support by demanding too many stressful "asks" of its volunteers.

The Community Investment Program enables any supporters of one of our registered non-profits to designate 3% of their spa purchases to benefit that group.

"Once you're registered, all they'll have to do is mention the Saratoga PTA as they're checking out," I explained. "We'll send you a check once a quarter."

Periodically, we offer "double rewards" and "triple rewards" for a designated period, to create some fresh excitement for our charities. We also offer the opportunity to do a "micro fundraiser" with four or more participants, and receive "quadruple rewards." (which is still just a 12% donation for the spa.)

A nearby jeweler and hair salon also participate in the Community Investment Program. The jeweler presents her checks at the non profit's meetings to make sure to drive the point home. Schools, arts organizations and social services organizations are all participants in CIP.

Back to our PTA President. She was delighted to hear about the CIP. But I wasn't done with her yet. I liked her concept, but I knew it would get lost in the shuffle of a big meeting with 250 parents each night.

"We're going to give you six $50 gift cards for your drawing," I explained. "Three for each night. That will create a little more excitement."

I thought she was going to faint.

"I shouldn't say this," she finally told me. "But I was just down the street at (Spa X). At first, the two young women at the front desk were friendly when I walked in. One was on the phone at the time."

"When I launched into my request, the one on the phone held her finger to her lips and 'shushed' me," she said in astonishment, obviously still reeling from this experience. "And the other one stopped smiling."

They sent her away empty handed.

The new, excited, President of the Saratoga Elementary PTA had just been given the bum's rush by my competitor for a request with a hard cost of about $20.

She walked through our door next. No wonder she was so apologetic!

Not only did we grant her modest wish (and then some) we provided her with a real connection. We gave her a new way to raise money, as well as exceeding her expectations. By demonstrating generosity and support, we sealed her loyalty as a passionate advocate of our business.

People who lead organizations are generally not shrinking violets. They're usually from the group that marketers call "Influencers," the 10% of the population who tells the other 90% where to shop, eat and play. The woman who is charged with leading a group of 500 parents and teachers is now in our corner.

This experience underscores several key behaviors and attitudes that are helping us survive the downturn:

1. Remain generous and supportive of your community, especially when you don't feel like it! Be careful what you cut, and the messages those cuts send. A business that relies on discretionary income and consumer confidence can't afford to send the message "times are tough." It's too easy to spook customers right now.

2. Get closer to your customers. Spend time on the operations floor. So many serendipitous connections come from having an ear open, and being in the right place at the right time. Most good spa managers and operators are out of their offices. A recession requires "all hands on deck."

3. Get closer to your staff. My presence doesn't have to be heavy; I often am "incognito" as a 'customer' having my makeup applied, or enjoying a manicure at the manicure bar. This is the perfect way to catch your staff doing things right, coaching on the best verbiage, or demonstrating the way to respond to situations like a donation request.

Tuesday, August 4, 2009

Lower Sales, Higher Profit?

How have we managed to improve our spa operating profit so dramatically during a downturn?

1. We've protected our gross margin. While we've increased incentives we've refrained from hysterical and unrestrained discounting, or what we call "Dropping the D Bomb." Our gross profit margin is 55%, just as it was last year. I'd like to see it get to 60%, but the fact that we are holding steady on the Middle Line is absolutely crucial to profit.

We reduced compensation this year as well, about 7% across the board, including commissions, which has also enabled us to keep the Middle Line healthy. Think of your gross profit as the war chest you build to pay out all your overhead expenses.

This is one area where you have control and discretion, but all the decisions are big ones. And you can't achieve this performance without private branding in your mix. Your gross profit on retail is sales minus cost of goods sold minus retail commission paid.

If you're like most spas, you get a 40% gross profit margin after COGS and a 10% commission. (Hey, I don't make the rules. Complain to the vendors who maintain the 50% gross margin "tradition.") That means our spa drives 15 points of gross profit more than you do on your retail sales.

2. We've cut operating expenses across every line item in our budget, being careful to preserve client amenities and the "little" luxuries that clients really notice. This is not something you do once; you do it over and over, even after everyone insists there's nothing more you can save.

True confessions: nothing could be further from my personal style than penny-pinching, but I have learned to love it, embracing my inner "Beverly" (my mom, the Depression Baby, who elevates it to a fine art.)

Instead of the question, "What difference is it going to make if we spend an extra ten bucks on this?" I have a completely different frame of reference. "Why should I waste any money?" is my new mantra.

And oh, have I wasted money.

How much? The latest report, at the halfway point of 2009, showed our overhead expenses lower by $160,000 than the same time in 2008. Overhead!

As we like to say around Preston Wynne Spa, "no one died; no one bled." The cuts were made, we adjusted, and we went on. For example, my operations director now has a modest office adjacent to the operations floor, rather than in a separate building. Talk about eliminating waste. Wasted steps, wasted morale--problems get solved faster when you know the boss is right there and ready to listen.

Don't get me wrong. We have also identified areas of "diminishing returns" for spending cuts. For example, we've cut our concierge team a little too far, placing too great a burden on aforementioned operations director, who wasn't able to complete our important monthly check-in meetings with staff because she was "lashed to the mast" at the front desk.

So we're putting some resources back...that's the other thing people forget about cuts. They're reversible.

Monday, July 6, 2009

They haven't got time for the pain...

We all know that the two big motivators of human behavior are 1.) avoiding pain and 2.) gaining pleasure. For years, the spa industry grew on the obvious attractions of motivator #2. And life was good.

But times have changed, and the spa industry been remarkably slow to pack away its "champagne wishes and caviar dreams". (If you're still larding your marketing communications with words like "luxurious," "indulgent," and "exclusive," please go to the back of the class.)

This year, it's all about helping your guests overcome pain. Results-oriented services are withstanding the recession's battering far better than those perceived as merely relaxing. Even stress relief is looked upon as a guilty pleasure. (It's a recession--everyone's stressed out!)

Maybe you've only used the word "pain" sparingly til now. Perhaps a discreet mention in the copy for a massage treatment. But many, if not most, of our clients are living with pain, and don't even realize that their spa therapist can actually do something about it. You need to tell them.

No, we're not recommending a return to dreary YMCA-style rubdowns with smelly liniment. Pain relief can and should be...fabulous.

Our newest offering, Thaiyurveda, is a Thai-inspired warm herbal poultice massage. The treatment, created by the inimitable healer Camille Western, is exotic, intriguing, and incredibly effective for pain relief. (I maintain that even listening to Camille describe the treatment in her melodic Puerto Rican accent is pretty good therapy.)

We introduced our new Thaiyurveda Warm Herbal Massage during a recent client spa party, with "bite size" samples administered on a table smack in the middle of our spa lobby. Guests swooned with, pain relief.

The next time a client calls your spa to inquire about treatments, make sure your staff asks, "Are you experiencing any muscle pain or discomfort?" "Sell in" with pain relief, to get them onto the table, but "sell through" with a luxurious experience, to get them to return. Offer motivating series specials (we like a summer 'mini series' of just three treatments.)

With a slight attitude adjustment, your spa can join the companies who know that "no pain, no gain," is one of the great truths of marketing during a downturn.

Thursday, June 4, 2009

Time for a website redesign? Don't forget social media...

Your next website is going to look different than your last. And not just because it's going to include the little Twitter birdie and the exhortation "Follow Me!" on your home page, or the Facebook icon, leading them to your spa's Fan Page or Group.

Your customer conversation is truly going online. Why let your spa lie there and take the pummeling of Yelpers in silence? You can be part of the dialogue. You MUST be part of the dialogue.

Social media experts agree, this is not a one-night stand. As with all effective marketing campaigns, social media campaigns are for the long haul, not just for "crying wolf" as one expert calls it. They take time and nurturing. And golly, no one has quite explained how they're going to make money yet. But the collective wisdom is, we all need to get on the train, even if we're not sure it will take us to Profitville.

"I don't have the time!" protest small businesses. But I think we all agree that we have time to talk to our customers. If a customer calls you on the phone, you answer it. If ten customers did, you'd answer those ten calls. And maybe hire someone to help you. Even spas are finding social media geeks within their teams and turning over much of this dialogue to them. We know that talking to customers is Good. And talking to customers generally leads to selling things to customers.

So when it's time to re-imagine your website, your Newsroom page is going to be a lot more dynamic, not a mouldering graveyard of old media placement pdfs, as most of ours currrently are. We're as guilty as the next, for the moment.

No, our website's new newsroom is going to look a lot like this souped-up baby, The Social Media Newsroom, a copyright free template from the nice folks at PR Squared

I'd love to hear from spas who are getting results from social media. What are you doing?

Tuesday, May 26, 2009

Small, Medium, Large and Extra Large

I'm a fan of looking outside my industry for fresh ways of solving problems, and I was delighted last month at SpaExec NYC to have a chance to do just that.

Leo Renaghan, Emeritus Professor from the Cornell University School of Hotel Administration, delivered the keynote address, "Creating Customer Value in a Down Economy." Providing insights into the social and emotional factors that affect economic decision-making, he encouraged the spa marketers in attendance to reframe our marketing messages to increase perceived value.

His thoughts on pricing impacted me the most. He explained that when consumers are given a choice of soft drink sizes that includes Small, Medium and Large, Medium beverages are sold the most. When Extra Large is added to the choices, Large beverages are the best sellers. Why?

Consumers perceive the Large to be the best value, but only when juxtaposed with Extra Large.

So perceived value is very much about context, and pricing has an enormous impact on perceived value. Yet the spa industry's understanding of the price-value equation is only just evolving. What sort of pricing context do we offer our customers? As little as possible, it seems. This probably springs from a shared misapprehension that we are "above" pricing tactics, such as dropping a service price to $99 from $100. In any other industry, such practices are accepted. But the spa industry has a stubborn affection for increments of $5.

It's not just about reducing price. Another example Renaghan provided was the improvement in sales that followed a product when its price was adjusted from $105 to $119.

How could one apply this example to services sold in the spa? At our spa, we decided to roll out a new promotion, called "Small Indulgences," designed to appeal to consumer's thawing desire to treat themselves well after months of sensible behavior. American consumers don't seem to do well with privation, and thought the "I deserve it" ethos is now officially unfashionable, it is also utterly indelible.

Small Indulgences was inspired by a very similar promotion being offered by one of the spas in our Spa Leadership Round Table, a group of Bay Area spas that get together every other month to share best practices. Avant Garde, led by the irrepressibly creative marketer Blanca Caballero, has been running their "Spa Tapas" promotion with great success for over a year.

We decided we wanted to focus attention on our menu of 45 minute spa treatments, which are normally priced at $75, as well as a luxury pedicure that is 75 minutes, for $75. So our menu consisted of a facial treatment, a massage, and a pedicure, to keep things simple.

One "indulgence" can be had for just $69 (a mere $6 off its normal price, a discount that most consumers would sniff at were it described as "9% off.") Two can be purchased for $129, and three can be had for $199. And in every case, the discount is less than 10%.

Voila! Small, medium and large. (extra large will be tested next!) The consumer suddenly has choice. They're in the driver's seat. The first purchase, the single Indulgence, is virtually a no-brainer, because that price point is so low. It opens what I call the "shopping door" in a consumer's head. (I'm sure there is a real scientific term for this phenomenon: you agonize for a half hour about whether to buy the dress...yet once you decide to buy it, you add a pair of shoes and a cute shawl. What just happened???)

So, while they're convinced that they deserve one little Indulgence...golly, that "Medium" starts looking good. Two spa treatments for $129? You can't beat that.

We launched the promotion through our favorite medium, the e mail blast, limiting it to weekdays. We had a strong response, stronger than we got for our "Buy a full session treatment and receive an additional 30 minutes of treatment with our compliments," which of course is a much better value.

This is yet another cautionary tale for folks who think throwing discounts at their customers is the best way to improve sales. We call discounting the "D" bomb, but I think "D" is the grade that marketers deserve if deep discounting is all they can come up with. (Come to the front of the class and write on the chalkboard "I won't mindlessly discount my great spa services" 100 times!)

"Small Indulgences" doesn't tear down our brand, or create expectations that more and more free stuff will be shoveled out as time goes on. It actually enables a new guest to try our spa, or an infrequent visitor to return more often; it taps into the midmarket price point without diminishing our brand promise. Wouldn't you rather have a bona fide spa experience than visit a storefront budget massage place? (Hint, luxury spa operators: there is a way to beat 'em at their own game, and it doesn't have to cost you giant chunks of margin.)

Renaghan recommended the book "Predictably Irrational," as a great introduction into the often baffling art and science of predicting consumer behavior. I can't wait to read it!