Thursday, November 8, 2007

The Gift Horse

We've all heard the expression: don't look a gift horse in the mouth. I confess, I looked, didn't like what I saw, and put the gift certificate horse out to pasture for a number of years. But the old girl still has some life in her, it turns out. A lot of life.

Those of you who never had a second thought about gift marketing can probably go get a Starbucks and touch up your manicures. For the rest of you who have had dark nights of the soul wondering if you were undermining your core business by flogging the gift horse--read on.

When I lead spa seminars, there is always a bit of bewilderment when I discuss my conflicted relationship with gift marketing. (Whenever you find someone wringing their hands and muttering over the merit of gift sales, whisper the words "escheat law" and watch them jump. Go on. It's fun.) Here's the problem. In many states, gift certificates cannot be expired. I've yet to meet a spa that keeps its hands out of the unredeemed gift cash cookie jar. You know you want it. We all do. We know that a substantial portion of these gift cards and certificates will never be redeemed.

If all we had to worry about was whether we had the ability to honor these certificates or not, it would be lovely. But unfortunately, we have a balance sheet that keeps us honest about our appetite for gift cash. And many spas in states where gift cards can't be expired face a creeping liability that doesn't go away. That liability may not seem "real," to you--the villagers with the gift certificates, pitchforks and torches won't march on your spa some night, demanding massages and pedicures. However, this paper liability can eat away at the living heart of your company, your owner equity. Buy your CPA a nice lunch next week and learn why this is not a Good Thing.

But let's put this particular gift marketing issue aside for a moment. My sentiment about gift sales made an about face last year after we conducted a customer survey that indicated one third of our top 350 clients had made their first visit to Preston Wynne with a gift certificate. Perhaps this comes as a "duh" to you. It did not, to me. That's because, back in the late 90's, when our spa was a mecca for the Queen for a Day Spa Pamper Package Gift Recipient, we learned that rampant gift sales had pushed down profit, pushed up employee turnover, and nuked our retail sales ratio. The typical spa gift recipient did not reschedule, did not begin a home care regimen, and (wince) often didn't leave a gratuity.

But times have changed. Many more Americans are now spa-goers, and spa gift certificates these days seldom go to Spa Virgins. They're being given to experienced, educated, and can-you-say-Qualified spa goers. Yes--the men and women that we love. Gift certificates, in short, can be the beginning of a beautiful relationship.

If you've noticed that the lines of dutiful gift buying men seem shorter each holiday season, you've hopefully marked an increase in online gift sales.

Please tell me that you can sell gifts online. This is as essential as breathing in today's spa industry. A gift shopper who cannot complete a secure gift card purchase transaction on your website will quickly move on to a spa that can fulfill. None of that "submit this request form" business. So last century.

After a long period of flat sales, gift activity at our spa began to grow again last year thanks to our new "print your own" gift certificate capability. Adding to the excitement: these were almost entirely brand spanking new customers, who found us through a web search.

Please, please tell me that your website is search engine optimized. If not, you're missing out on a lot of gift sales. You're missing out on a lot of sales, period.
(I'll throw in a plug for our web developer Accelerator Enterprise Technologies here; go find them at

Kick off your selling season with a special event that encourages your regular guests to pick up spa gift certificates before the 12-days-of-Christmas wave hits. Offer an incentive--we'll be giving away a gift certificate for a spa pedicure with every $150 in gift cards a guest purchases. Because these giveaway gift certificates are promotional, they can be expired. We expire them in 90 days, offering plenty of time for the guest to use them. Do these sales cut into our regular gift volume? We don't think so--most of those late-season buyers are guys buying for wives and sweethearts, and most of the people that take advantage of the pre-season promotion are spa regulars, about 90% of whom are female.

There's more than one way to make a gift horse gallop. See you at the races!

Monday, September 10, 2007

Saturation Nation: The Spa Market Matures

Does anybody do market research any more?

I hate to be a party pooper--especially with a consulting business that serves appetizers to the party goers. (Spa Startup Workshop, anyone? Take two, they're small.)

But really, people!

Market research is not asking your friends if they'd like for you to open a spa.

Market research is not visiting every resort spa in the hemisphere and deciding that the local market is sorely lacking in 400 square foot treatment rooms with ensuite Swiss showers, heated floors, saltwater aquariums, fireplaces and butler service.

The high end of the spa market is saturated. Yes, there are pockets of opportunity here and there. But saturation is a hard reality. The high net worth individual has an abundance of choices when considering where to spend their spa dollars. And increasingly, they're spreading the love around.

The problem with would-be spa owners is that, all too often, they're hard core spa goers. I know, that sounds like a Good Thing. We wouldn't want to buy wine from a winemaker who wasn't a wine drinker. We wouldn't want to eat an elegant dinner at a restaurant run by someone who only eats fast food.

But the spa goer-turned-spa entrepreneur--sort of like restauranteurs and winemakers--are often inspired by a deeply personal vision. That vision sometimes borders on obsession. These are the clients that start the conversation with the spa consultant by discussing in breathless detail the water feature they're planning for the entryway. (They've even got the Malaysian stone mason they've imported to do the work living in their guest room for three months while it's been constructed.)

If you're extremely lucky, your personal vision will prove compelling to lots of potential customers. If you're not so lucky, you'll blow a couple of million dollars on a spa that you simply can't afford to operate. And because you're such a spa geek, it will be impossible for you to believe that your marketplace just isn't ready for the Organic Tibetan Yak Milk baths, and worse still, doesn't even appreciate the heated, tumbled marble mosaic tile floors. The Philistines!

I know this sounds silly. But the people getting caught in this "if we build it, they will come" trap are not lacking in brains or even business education. There are plenty of MBAs freaking out over their spa's P & L tonight.

So if market saturation is nigh, why aren't more spas going out of business? Surely
we should be witnessing a shakeout. That's what happens in an industry that's saturated.

As usual, the answer is that spas are Special. Because they inspire irrational passion, there is usually someone waiting in the wings to catch a swooning spa. That entrepreneur may be paying pennies on the dollar for the facility, or may simply be walking into a lease--sometimes on a fully equipped spa. So their odds of success are better than the original operator's.

If you're considering the best way to enter the spa market, look for a customer group or market that's not being served. (Note that I say "customer group." You're not a group. It's likely that you are even an anomaly.)

One of my consulting clients literally searched the entire United States for the community with the perfect demographics and psychographics for her startup spa. When she found it, she moved there and opened a spa. She is successful because she listened to the market and she built her venture--and her life--around the needs of her customers. Her motto could easily be, "If we build it, it's because they're already here."

One area of the spa industry in which opportunity still looms large is spa management. Relative to the number of spas out there, there are very few spa managers. Experienced managers are being wooed by everyone from big hospitality organizations to day spas.

This is also a great place to start for an aspiring spa owner. If your principal experience with spa operations is being a spa client, you owe it to yourself to get a reality check. Go behind the curtain and see what's really happening while you're dozing under your Blueberry Antioxidant mask.

Spas always need smart, motivated people to man their front desks. Be frank about your ultimate aspirations; not everyone wants to play Spa University for you. But I know the best way to prevent another new competitor from entering my market is to give them a front row seat to the phenomenon of Spa Saturation!

Tuesday, September 4, 2007

The High Cost of Free Time

In this month’s Wynne Business newsletter, I discussed the impact of paid time off on your revenue production budget. I mentioned the rather shocking discovery that our employees work just 80% of their scheduled hours, through a combination of paid time off and additional unpaid time off. Spa therapists and practitioners enjoy having a flexible schedule that enables them to travel, take classes, or leave the spa “if there’s nothing going on.” For many employees, unpaid time off is an additional benefit of working in the spa setting.

Unpaid time off is often looked at as an entitlement: “I’m not here; you don’t have to pay me, and someone will work this shift—so why can’t I go to Maui for my yoga retreat?”

Many spas have policies dictating how much unpaid time off is allowed. In the “real world” this is standard boilerplate HR/employee manual stuff. In Spa World, it’s the exception. (Employee manual? Please visit the “tools and products” section of our website and we’ll help you make one of your very own!)

At Preston Wynne Spas, unpaid time off is meticulously tracked through the time clock in our Millenium software. All employees have a “bank” of unpaid time off they’re allowed to take within a year. They can put time back into their bank if they cover a shift for another employee.

One hair raising point about the importance of tracking hours worked. If you offer medical benefits, you need a way to demonstrate that covered employees are indeed working the minimum qualifying hours. “Close enough” isn’t. In spas where service providers are paid by the appointment (commission or fee-for-service) managers often allow employees to cut a shift short if they’re not scheduled with a client.

If there is a major medical insurance claim by an employee, the first thing your insurance company will do is audit their timesheets. If the employee has not actually worked the qualifying hours, even if they’re a just a few hours shy, you’ll be stuck with the entire bill for their care. Imagine what would happen to your company if an employee had a catastrophic illness or injury, and you were left holding the bag!

In many spas, extra unpaid time off is permitted for employees who can get their assigned schedule covered by another service provider. In our own spa, a wall in our employee prep area is usually covered with “coverage request” forms, in which service providers solicit co-workers to take over a shift for them. Though these coverage requests must be approved by their supervisor, the standard operating procedure has been to allow employees to take as much time as they’re able to cover.

What’s wrong with this picture? Well, imagine a popular esthetician, Busy Esty, getting “coverage” from her co-worker, Newbie, who as yet has few requests. Busy Esty’s regular request clients aren’t going to accept an appointment with the newcomer. Nor does Busy Esty want to give up her regular clients. So a shift that would have been 100% sold out is now 25% utilized. And worse yet, those regular guests who would have made 10 visits to the spa this year are going to make one less. They’d rather just “wait” for Busy Esty.

Here’s another scenario. The esthetician who is “covering” for Busy Esty is popular too, but she’s coming in on a day she doesn’t usually work. Her clients are accustomed to seeing her on certain days of the week, and at certain times. Even though she is offering them an opportunity to come in and see her, they’re less likely to move to a different day and time than their normal slot. So once again, the shift is undersold when it should be full. It is crucial that anyone “covering” a shift has the ability to generate the revenue for that particular shift.

If your spa is to reach its revenue budget, two things have to happen. As mentioned in our newsletter, you have to set accurate goals for sales production. (We call these Contributions, since “quota” is a dirty word to Spa Folk.) We know that we have to gross the number up to account for the fact that our workers will only complete a portion of their assigned schedule. Depending on how lax or strict you are about unpaid time off, this number can range from 10-30%.

As I mentioned, our employees have been working, on average, 80% of their scheduled time. Imagine, only having 80% of your workforce on hand, but setting their sales contribution as though they were on hand for 100% of their shifts. When you’re in the hands-on Personal Services business, it’s not going to happen. You’re going to miss your goals.

A tremendous challenge for quality spa operators is the shortage of qualified employees. No spa I know has a vast talent pool of massage therapists, estheticians and nail care experts at the ready whenever they need a hand. Instead, well trained staff members are often feeling that they’re stretched a bit thin, and working more shifts than they prefer.

So how can you manage unpaid time off in a way that works for your team and your bottom line? Here are some basic ground rules.

1. Set a limit on unpaid time off. You can’t afford not to. Make sure the amount of time is reasonable for both your company and your team. In our spa, the unpaid time off benefits are as follows:
- After 12 months, 5 unpaid days may be taken per year
- Years 2-5: 10 unpaid days may be taken per year
- Years 6-10: 15 unpaid days may be taken per year
This is based on a full time schedule. Part time employees receive fewer unpaid days off per year—remember, they’re working fewer days to begin with!
Remember that this time is in addition to vacation, sick and holiday pay.

2. Increase the benefit with seniority, but within reason. Those employees should have lots of regular requests.

3. It’s perfectly reasonable to ask that if an employee can’t commit to fulfilling their schedule within the parameters of your time off policies, then they should not obligate themselves to so many days to begin with. By committing to fewer scheduled days and picking up additional shifts to cover co-worker’s days off, they could end up with a similar outcome in terms of the number of total days worked, and the spa can have a more predictable way of generating revenue.
4. Enable employees to “bank” unpaid time off and build up their reserve by covering shifts for co-workers. This puts some control back in their hands.

5. Communicate to employees when they are running low on unpaid time off. Help them strategize about how to use their unpaid time off. If they’re used to an endless supply of unpaid time off, having new limits can be a rude awakening.

6. Say “no” when you have to. An employee who continuously consumes all their time off and still expects more is not committed to the same goals you are. You may think they’re invaluable, but upon closer examination, you may find that their contribution to your success is minimal.

Unpaid time off is a great benefit for workers in our industry. Just make sure that you receive enough bang for your buck—just because you don’t write a check doesn’t mean you’re not paying for it!

Monday, May 28, 2007

Whose Side Are You On, Anyway?

Call me late to the party. I didn’t pick up Danny Meyer’s wonderful “Setting the Table” until last month, whereupon I devoured it with the sort of unbridled pleasure that I normally reserve for dessert. Don’t be deceived; this richly detailed book is a substantial main course. To flog that food metaphor one more time, it’s a banquet of great customer service wisdom, distilled over the twenty-plus years that Meyer has been operating his restaurants in New York. I’m abashed to confess that I have been a customer of none of the diverse restaurants that make up the Union Square Hospitality Group, which include The Union Square CafĂ© and the Gramercy Tavern.

There are several wonderful themes running through this book. One is Meyer’s refreshingly frank description of the challenges of delivering great hospitality and the tactics he’s used to ensure guest satisfaction. For those of us who experience each lapse in our spa’s performance as a personal failure, it’s heartening to remember that failure is an inevitable part of the learning process. An accomplished Michelin-two-star chef I know explained to me very matter of factly, “On any given night, I know that 3% of my guests will not be completely satisfied.”

It’s only a failure when we don’t learn from these experiences and use them as an opportunity to make our companies stronger and our guests happier. The concept of continuous improvement, the Total Quality Management concept of “kaizen,” acknowledges that perfection is a never-ending journey, not a destination. Meyers offers himself as a companion on this journey for any willing “hospitalitarian.”

Another theme of “Setting the Table” is his description of his deeply committed path of service to others through food and hospitality. Many of us will recognize ourselves in his desire to maintain that visceral customer contact, even as his company grows past 1,000 employees and six unique restaurants.

Meyers’ gift here is expressing his philosophy in ways that are easy to understand and still resonant and fresh. I particularly enjoyed the concept of making sure that guests feel that we’re “on their side,” when they encounter disappointments or obstacles such as a fully committed schedule. This concept is one that you can instantly share with your spa team. Indeed, most of our employees are emotionally on the guest’s “side”, yet when they can’t grant a customer’s wish, find themselves feeling defensive. I’m not even talking about rudeness here, just the uncomfortable necessity of pushing back, resisting, or turning someone down.
Many spa operators will find employees acting as what Meyer calls “gatekeepers”, pushing back firmly against un-grantable customer requests, without conveying to that guest how much you’d like to grant their wish—even when you can’t.

Here’s how that conversation typically would go with a guest calling your spa for an appointment for herself and her two daughters this Saturday:
GUEST: I’d like to make an appointment for three facials this Saturday morning around 10 a.m.
SPA RESERVATIONIST: Oh, I’m sorry. We’re completely full on Saturday. Can I check another date for you?

While technically this is a correct response, and doesn’t violate any obvious laws of customer service, think about what’s happening for the guest. She’s made a request and been—nicely—rebuffed. She may be feeling disappointed. She may even be feeling foolish. The reservationist, while polite, has not conveyed empathy beyond the expected “I’m sorry.” And by offering another date, the reservationist hasn’t really acknowledged that the guest is probably disappointed or frustrated by this turn of events. One moment, she’s eagerly calling us, ready to give us her business. The next minute, she’s shot down.

How can we let this guest know we’re on their side?

Here’s how I’d “rewrite” the response:
SPA RESERVATIONIST: I’m so sorry, I would really love to get the three of you in for treatments this Saturday, but it looks like we’re currently full. Can I put you on my waiting list for a cancellation? We’d be delighted to give you a call if anything changes.”

Regardless of the guest’s response, we should also offer, “Would you like me to check an alternate date for you?” or even suggest a possible Plan B if there’s an obvious alternative (for this guest, we could offer a Sunday instead of a Saturday if it were open.) Too often customer service agents play a game of “guess what I’ve got in my hand?” forcing customers to recite a litany of their own alternatives rather than proactively offering suggestions.

This type of response honors the customer’s desire to do business with us and lets them know we would really like to welcome them to the spa and that we are going to make an extra effort on their behalf. It also relieves some stress for your customer service front line. It sounds elementary, but next time you listen to your team, ask yourself, “Are they making our guests feel like we’re on their side?” It may surprise you. It’s a subtle adjustment, but the emotional impact is tremendous.

Tuesday, April 10, 2007

Raising Your TQ (Talent Quotient)

If your company has been around as long as ours has—23 years—it takes a lot of energy to keep your processes fresh, and your edge sharp. Like any long-established company, we have a strong culture, and a (sometimes maddeningly) predictable way of doing things.

One of our core values is “Build and Protect and Fun and Harmonious Work Environment.” Lately, I’ve been reconsidering this idea. Not that I think fun and harmony aren’t important; they’re critical to the happiness of our spa workforce. But when it came to hiring, I realized we were looking for “our type”—an employee who seemed to harmonize with the existing team—very possibly at the expense of talent. One of the other three core values, “Achieve our Goals,” seemed to be taking a back seat to Team Harmony in the recruiting process. For example, I’d get a little nervous around people who seemed too driven or intense. Candidates who firmly proclaimed that one of their goals was to open their own spa were often passed over—hey, I didn’t want to play “spa university” for an ambitious job-hopper.

For years, we cultivated a very homogeneous team. And then something great happened. We experienced a lot of turnover within a short period of time. And in the process of rebuilding our team, I looked hard at the assumptions we’d been making about what constituted a “successful” Preston Wynne employee.

During this time I read “First, Break All the Rules,” the outstanding Marcus Buckingham book based on Gallup surveys of employees and managers. The subtitle of the book is, “What the world’s greatest managers do differently.” Among the behaviors it describes is the relentless quest for talent—finding it and developing it. I recognized immediately that talent had not been at the top of my list of must-have’s. Certainly, aptitude was crucial. But for years, I’d maintained that personality was the most important trait; we could teach someone with good aptitude the technical skills they’d need, because we had a strong in-house training program. But talent is more than attitude and aptitude. True talent includes passion and drive and often, an ineffable “X Factor”. We’d often been spooked by our passionate, driven candidates. When one “got through” they might succeed, but just as many probably felt ignored. We offered a certain management style that worked very well for the majority of the team—but it didn’t always meet the needs of exceptional people.

When I look back at the top talents I’ve employed, they’ve often been what are known as Positive Deviants. They stand out. Some have been a little eccentric. Some have been a little messy. Some have been downright obsessive about their craft. The one thing that talented folks seem to have in common is that they don’t have a lot in common. It’s crucial that you suss out their particular needs—their quirks, their obsessions—and you take care of them.

By encouraging you to lavish your talent with attention, I’m not suggesting that you hire prima donnas and encourage them to run amok. We’ve all seen the destructive power of “superstar” employees who are not held to the same standard as their co-workers. That sort of talent is very costly, because the performance of other employees is undermined by their resentment and frustration. Often, when an intolerable superstar is fired, the performance of the rest of the staff leaps.

The 80/20 rule of employee development holds that managers spend 80% of their time dealing with the 20% of their team that underperforms. Our culture focuses energy on fixing weakness rather than accentuating strengths, which on the face of it is practical. In busy spa operations, squeaky wheels get the grease. But your best investment of time and energy is in strong, talented people. Your challenge as a manager is to make sure the smoothest-spinning wheels are very well maintained.

Customize the way you approach your talented workers. Tailor the way you communicate with them, cultivate their abilities, and support them in their career development. Invite them to share their talent with others. We encourage our top talents to act as peer mentors and help disseminate their skills and knowledge. But one size does not fit all when it comes to top talent.

Positive deviants bring a tremendous amount of passion to the workplace. When blocked (by rigid bureaucracy, lack of management “quality time” or under-motivated/ under-performing team mates), this can turn into frustration. Mentoring is essential to their well-being and development. I realize now that neglecting talented and seemingly self-regulating employees to spend our energy rehabilitating problem children is a recipe for a talent hemorrhage.

To flog that metaphor, I’m happy to say that we have lots of vital “new blood” in our team, which is energizing and uplifting the veteran staff members as well. I understand now that we must resist the temptation to “set them and forget them” because they’re self motivated. (Talk about no good deed going unpunished.) Instead, we’ll keep the bars set high for our talent—only by challenging them will we keep them fully engaged.

Friday, March 30, 2007


Spa guest appointment behavior has changed dramatically in the last five years, as our culture has become increasingly "non-committal." What used to be considered "flaky" behavior has become the norm; lives are ever-busier, schedules are more hectic and ever-changing, families are running a dozen different directions at once every day of the week.

This is not good news for businesses that run on appointments. However, trying to make your customers operate by your rules is a losing strategy. It is impossible to be rigid and customer-centric at once. In today's marketplace, a competitive advantage can be had by being flexible and accommodating. It may be time to re-evaluate your cancellation policy, particularly in light of increased competition.

There are two goals in cancellation management. One is to ensure that employees who are paid by the appointment are not unduly impacted by customer cancellations. The second is to accommodate guests' busy lives while not completely ceding control of your revenue. In other words, being completely flexible is as dangerous as being completely rigid.

Good schedule management is an important benefit you offer to your therapeutic treatment staff. Good schedule management will enable you to attract top service providers, who in turn will give your guests the best possible service.

A key element of good schedule management is an effective cancellation / no show program. A good cancellation / no show program will provide flexibility for your guests, compensation for your service providers and recompense for your business.

We ask our guests to provide at least 24 hours notice with any changes to their reservations (48 hours for reservations of 2 or more hours). If for any reason they need to change within the 24 hour window, we’ll make every effort to fill the vacated appointment time with another guest. If we’re able to do so, there is no charge. If we are unable to fill the vacated time, we simply charge $40 per hour of service reserved (or portion thereof). This flexible cancellation protocol applies to all guests, regardless of their reason for change… a sick child, a last-minute weekend away, an injured pet, etc.

We’ve found that our flexible $40 charge, rather than the full amount of the service (as many spas charge) provides our guests with flexible options. Flexibility is the key word in your communication with guests. Generally, customers recognize that the business requires a reasonable financial commitment from them to ensure availability of an appointment. By charging only a portion of the reserved services value, we demonstrate our understanding that a cancelled appointment is a disappointment for all involved and that we're not penalizing them, but rather protecting the earnings of our employees.

Administration of an effective program is 100% reliant on the compliance of your front desk/reservations staff. It is imperative that all reservations are guaranteed with either a gift card or a credit card, and that your protocol is clearly communicated to all guests. If these components are missing, your program will not work. We make a notation in our guests’ files to communicate internally that the guest is aware of our protocol.

A courtesy reminder goes out to our guests approximately 48 hours prior to their scheduled visit. This can be a phone call or an e mail. (Our Millenium software program lets us automate our e mail confirmations, a huge time saver. This has become our guests' preferred confirmation medium.)

Let the guest know you will assist them if they should need to make any changes. By calling 48 hours in advance and enabling changes up to 24 hours before their appointment, we make sure that guests have plenty of time to amend schedules without penalty.

The confirmation also gives you another opportunity to reiterate your cancellation protocol to the guest. We use the following telephone script for our confirmations:

“Good morning. This is Paul calling from Preston Wynne Spa in Saratoga. We’re calling to confirm Babette’s appointment for this coming (day/time). If for any reason you need to make a change to your reservation, please let us know soon as possible at 408-741-5525, as your appointment is guaranteed for this date and time. Thank you so much. We look forward to seeing you on (day/time).”

The administration of your cancellation program can become unwieldy and costly if not kept in a simple format.

What happens when a guest cancels within the window, or no-shows?

We use a simple form for the support staff to complete when a guest cancels/changes their reservation within the 24 hour window (technical team members complete the form for ‘no-show’ appointments). We typically receive between 1 and 3 cancellations/no shows per day, so processing the forms through the front desk has been the ideal solution. Because we process the cancellations on a daily basis, utilizing additional staff resources to administer the program is unnecessary. An added benefit is the guest receives notice of the charge in real time, making the collections process highly effective and consistent.

Treatment staff are compensated for a portion of their normal per-treatment rate, using the funds received by the cancellation program. Out of the $40 received by the spa for a cancellation, the employee who lost the appointment receives $25. The rest is used by the spa to defray the administrative cost of the program, not to mention payroll burden on that $25.

By stabilizing employee earnings, the spa can establish its role as an employer of choice. A good cancellation management program produces a genuine win-win!

Monday, March 26, 2007


Following is a recent column I wrote for American Spa magazine's "Business Builders" column. Wynne Business receives many questions about private labeling, a tremendous hot-button topic in the industry. We also deal with the topic in depth in our Real World Startup Workshop. As well, our Spa Directors' Management Intensive always includes a lively conversation about the pros and cons of private branding.

“Branding” is the marketing buzzword of the decade, and a process that business experts consider essential to success. Our lives are touched by iconic brands such as Apple, Nike,
Harley Davidson and Coach, and as entrepreneurs we dream of creating a household name of our own. Brand-building in a spa requires branded products and services. But whose? As a spa consultant, I’m constantly asked by my clients which brands I think are the best. The question seems perfectly reasonable, save for one thing. If you spend all your time building someone else’s brand, who’s going to build yours?

Think for a moment about Target’s branding strategy. The democratization of style and design is Target’s brand promise. It offers enticing private brands created by household name designers—but unlike traditional retailers, these brands are exclusive to Target. What a strategy!

Now I’d like you to think about the day it’s time to retire. Your business valuation is probably not going to be very impressive; this is the service industry. What do you have to offer that potential buyer? Brand equity. Customers who are loyal to your company, its products and services.

A real brand is more than a sum of its operating parts. It has a life of its own.
A great spa brand offers unique, proprietary experiences that customers can’t have elsewhere. And contributing to those unique experiences are great products that they can’t buy elsewhere.

Many of our industry’s manufacturers understand branding far better than the spas they serve. If you’d like to carry certain prestige brands, they require that you include some of their proprietary services on your spa menu. This is brilliant branding—for them! But when Prestige Brand has installed their proprietary services on the menus of both you and your competitor, how will you differentiate yourself?

Here’s another common scenario. Spa X retails a popular product brand—we’ll call it Myrtle’s Miracle. As estheticians come and go at Spa X, they’re “pollinated” by Myrtle’s Miracle, and then one fine day, they take their brand loyalty with them to Spa Q, their next destination. One can virtually map the “explosion” of former estheticians using MM from its epicenter at Spa X. The market is eventually awash in a profusion of competitors selling the same product—Myrtle’s Miracle. The various parties content themselves with a smaller slice of the same pie.
What if, instead, Spa X sold their own private Brand X, which was exclusive to them? When Susie the esthetician heads to greener pastures, Brand X, happily, does not go with her. Clients of Susie’s who love Brand X still visit the spa to buy it—making it easier to Spa X to woo them back. To make it easy to keep Brand X in its clients’ hands, Spa X also retails its exclusive Brand X in its online store, eventually creating a following for the product in people who have never even visited the spa. When it’s time for Ms. X to retire, and sell her company, she has a true asset in Brand X.

Many of my startup clients feel they’re not “ready” for a private brand when they first open their doors. I tell them if they’re afraid to put their name on a bottle, they’d better not put their name on a building, either. Many of my turnaround clients feel that they can’t give up the support they receive from their brand. Support is an area where brands truly shine. But that support can come at a tremendous cost.

Exclusivity is one of the two key benefits of private branding. The other is profitability. I’ve yet to learn how or when it was decided that spas should receive 50% gross profit (or less) on products that we sell. Oddly, no manufacturer I’ve ever asked about this has been able to tell me why; it’s been industry standard for so long. Back in the days when our industry was comprised of mom and pop salons with proprietors “behind the chair,” and independent operators or therapists renting rooms, 50% gross profit worked fine. In today’s high-overhead spas that pay 10% retail commission to employees, it doesn’t pencil. At Preston Wynne, if a manufacturer can’t deliver at least a 60% gross margin, I just can’t afford to carry their product.

As a one-time owner of a private label company (spun out from Preston Wynne in 2002), I might not appear to be the most objective person when it comes to the spa industry’s private label-vs.-branded debate. But as a spa operator, I use a very objective measure when I compare the benefits of private branding—my profit and loss statement.

Much like the generic food companies that sprung up in the 1980’s, private brand manufacturers in our industry at first struggled with the perception that their offerings were sub-par. And to be frank, sometimes they were. The quality of private brand products has steadily climbed in the 20-plus years I’ve been in business, and options have expanded. Through careful research I’ve been able to hand-pick a collection of wonderful suppliers whose formulas consistently delight my guests.

The private label trend is growing—as more professional managers bring best practices from other industries and bump their heads against our industry’s notoriously low profit margins, private label sales have steadily climbed. To many of the “outsiders” I’ve consulted with, private label is a foregone conclusion. They can’t make their business plan work without it. Unlike the estheticians that fell blindly in love with Myrtle’s Miracle, their first priority is making sure that their business is healthy and profitable.

But wait. You’ve probably talked to spa owners who have dabbled with private brands and insist that they “don’t sell.” This actually translates to, “My staff doesn’t sell.” (This in turn translates to: “I don’t know how to motivate my staff to sell.”) Whenever Wynne Business does turnaround work with a spa that is not selling well (with a retail ratio—the percentage of retail sales to total sales—below 25%) they insist that their branded products sell the best. Of course they do!

A private brand product line does best in a spa where the brand—the company—is respected and supported by its employees. A private brand does well in a well-run organization. Private branding is not the panacea for poor management, or lack of management. In a weak organization, a strong outside brand may actually provide some of the support, structure and vision that’s lacking in management. This is an appealing proposition for many technicians-turned-managers who lack the skill or even the will to manage their spas and their retail programs. Ultimately though, branding autonomy gives the company the best chance of maximizing profit and value.

I can vouch for the fact that retail sales in the spa environment have become more competitive and more difficult in the past ten years. Our spa’s customers are bombarded by companies marketing skin and body care products and cosmetics, including department stores (your number one competitor) drugstores (number two) infomercials, specialty retailers like Sephora, multi level marketers, natural foods stores, even doctors.

Yet the fact remains that the primary influencer of a spa guest’s beauty and self-care purchases is their service provider. It’s a powerful sales platform. In the treatment room, thanks to the magic of the spa experience, and the rapport and trust you’ve built with your guest, you are in charge. That means your brand has the opportunity to compete, head to head, with the best-marketed lines in the world, and win.


1. “Over label” private label. These collections of products come ready to sell, in generic packages that are often clean and attractive; you add your label. You review the vendor’s stock offerings and pick the products that you like best.
With over label, someone in your operation literally applies your labels to the products. CBI Laboratories, Coats Aloe, YG Laboratories and Manna Cosmetics’ Esthetic Research Group all market “over label” products. If you are buying large quantities you can silkscreen containers instead; however, the minimum orders for most spas are prohibitive.
2. Semi-custom, or “custom label” private label. Again, you choose your products from a library of finished products, and the manufacturer labels them for you. These products come to you ready to put on your shelves. The semi-custom option may include the opportunity to re-name products or even rewrite label copy, which can increase your house brand’s distinctiveness. New, high tech printing processes have made custom labeling inexpensive and fast. Some of these manufacturers have small minimum orders.
Branded companies are also testing custom-label divisions. Maui based Island Essence provides custom-label and semi-custom bath and body products to the Hawaiian spa market, and AcquaCures, based in Hollister, California began offering its bath-and-body Passport to Beauty Collection for custom labeling since 2005.

3. True Custom Manufacturing. This type of private branding enables you to create your own formulas. You’ll choose from packaging components—bottles, jars, lids, dispensers, boxes--to assemble a collection with a specific look. Minimum orders for some packaging components can be 10,000 pieces or more. Finally, you’ll complete your product’s image with custom labels, silkscreening, or hot stamping with high-end metallic foils.
Development costs for true custom products are very high, with R & D costs of $20,000 per product or more not uncommon. One custom manufacturer, Covalence, in Phoenix Arizona, has modest R & D charges that bring custom formulation into the realm of the affordable. They also wholesale their own library of products, which can be over-labeled or custom-packaged.
Custom manufacturing requires an enormous commitment of time and energy on the part of the spa, and a champion is needed. If you’re collecting feedback from your team, you’ll need good project management tools in order to keep track of your many iterations and the outcome of each version’s trial. I generally discourage new spas from undertaking a full custom manufacturing process, or insist that the scope be very limited. Few are prepared for the cost, the time commitment, and the focus required.
Owning the formulas for your own product line, though? Priceless.

4. Hybrid Private Branding. Branded companies who pay attention to the trends have seen the private label juggernaut coming. Some are now engaged in co-branding with prestige spa brands, a relationship that can hopefully provide the best of both worlds: exclusivity, and brand-building for both parties.

Friday, February 23, 2007


In a recent American Spa magazine "Business Builders" column, I described our company's experience with the growing phenomenon of online review sites. I have a confession to make. My feelings about the fastest growing and arguably most influential online review site, Yelp, have changed. In a plot twist straight out of a romantic comedy between totally mismatched, star-crossed characters, I have...gulp...fallen in love.

How did this happen? For a couple of months, anyone who talked to me about marketing was likely to hear my rant about the dark side of user-generated-content.

The key to this 180 degree shift lies in the ability Yelp gives you to contact folks who review you. After I had a number of positive exchanges with my critics, the frustration abated. I realized that this was no different than the "real world", in that I could communicate with clients and do what was needed to make them happy. And ironically, the more I interacted with Yelp users, the more I came to appreciate the potential of this medium and the value of this group of consumers. I stopped being a Review Site Victim.

The Yelpers (as they’re known) we invited back to the spa invariably posted amended reviews that also discussed our commitment to customer service. They are also self-selected as a group of people who enjoy telling others about businesses that they like. If we can make them happy, we have harnessed a very inexpensive marketing asset. The traffic to this site is staggering.

Here’s how to make yourself the online reviewer’s spa of choice:

1. Respond promptly to all reviews, good, bad and indifferent. (Yelp has a contact interface that preserves their anonymity if they so choose, but still lets you get in touch.) Thank the reviewer. I have given upgrades and perks to people who have given us a particularly nice review, and let them know I’d like to meet them when they visit the spa again. Reviewers are used to no response from businesses. Show them some love! I think hearing from us also makes them more responsible reviewers. Suddenly, they’re reviewing the businesses that are the livelihoods of real people, instead of a faceless corporation.

2. For negative or indifferent reviews, offer to rectify the situation and enlist the reviewer’s help in improving your service. We have them Mystery Shop us, as our guest. This also educates them on the complexity of delivering great service and makes them a more informed reviewer. (It also sharpens their eyes when they visit a competitor who does not do all the things that we do to ensure a great customer experience!) Without exception, the “returning reviewers” who originally posted negative reviews have amended their online reviews and praised our customer service. Not one of these individuals was asked to change their review as a condition of their service re-do. We expected the results to speak for themselves, and for the reviewer to do the right thing. So far, they have. (Only one reviewer I've contacted has eluded my attempts to make her happy--refusing to respond to my invitations to return as our guest. This individual had not had a service at our spa in five years.)

3. Join the review site and write reviews (no, don’t review your competitor’s spa!) This makes you a member of the community, a comrade in arms. As a fellow Yelper, you have some “street cred” with this new generation of reviewers. The more useful and interesting reviews you write, the more respected you'll be as a peer.

4. Finally, you can now participate in Yelp’s “featured business” advertising program. Yes, I am giving them my money! (That's true love.) This enhanced listing includes a detailed description of our company and a slide show of photos from our spa, which appears when someone searching for a spa in our area clicks on our listing. Sweeter still, my ad shows up when they click on our competitor’s listings! With our listing, I've included a “personal message” and a photo of myself, further cementing the personal connection with the reader.

The happy epilogue: my staff are talking about the new customers they're getting from Yelp. We've also instituted a practice of having our management team members call all new customers 48 hours after their first visit to the spa, to see if we have met their expectations, and to learn if we could do anything better. Rather than wait to have a disappointed customer post a review, we're being more proactive than ever before.

As good as we thought our customer service was, Yelp has helped us make it even better. What's not to love about that?

Tuesday, January 2, 2007

New Year's Evolution: Getting Focused

There’s a lot of interest right now in a concept called the Law of Attraction—a principle that states what you focus on, you get.

Many of us are in our spas today, our first work day of the New Year, vowing to do things differently in 2007. Making resolutions, or goals, is part of the process of focusing on what you want. But as we all know too well, that’s the easy part.

Everyone uses different tools to help them get focused. Spa operations, in their lovable, chaotic way, have a unique way of de-focusing us on those long term, big ticket goals. By now (it’s noon on Tuesday, January 2) you may well have been thrown headlong into something called “the tyranny of the immediate.” An emergency, a crisis, an operational hair ball that requires untangling.

Stuff happens.

Here are some simple techniques I’ve learned for keeping my important goals in focus:

Morning Routine:

Start your day by reviewing your big goals. You’re fresh and energized at the beginning of the day. This is the perfect time to focus on those high-value goals, like launching a new sales training program for your estheticians. Make time for this every day. This is an “important but not urgent” activity that is crucial to success.

Avoid the trap of starting your day with e mail! This is one I learned from Verne Harnish, the great business expert and author. When you start your day with e mail, everyone else’s priorities become yours—you start in a reactive, not proactive state. Schedule time for your e mail and leave it alone in between. It will eat your day and leave you little to show for it.

Create a fresh, reprioritized new “to do” list every day.
This is one of the best ways to focus your attention. There is no perfect formula for a daily list format—it’s whatever works for you. Over the years, my daily list has turned into an Excel spreadsheet, where I have my “projects” listed along with the next three action items for each. This works better for me than a linear list, because it keeps my to-do items in categories and my deliverables in manageable numbers. I update it every day at the computer and print a fresh copy. During the day, I scribble messages and notes on it—Post It notes get attached, too. Everything I need to do ends up there, and only there. That’s key. Then…

Evening Routine:

1. Transfer “to do” items from your list to your calendar by day’s end.
Nothing is more demoralizing and de-energizing than a list of things to do that’s as long as your arm and keeps growing. Assign dates and times to as many of your to-do items as you can. It will give you a much more real sense of how to get things done—and what you can’t do. (You might start saying “no” to activities that are not high-return!) Your goal should be to keep your list as short as possible.

2. Give yourself credit for your daily accomplishments. No, the action items never end, but that’s no reason to focus only on what you haven’t done. Make sure that part of your end-of-the-day ritual is focusing on what you did accomplish that day. Write it down.

Focus is the most common trait of very successful people, regardless of their industry. So now when stuff happens—massage therapists call in sick, shipments get delayed and equipment breaks—you’ll still have spent “quality time” with your key goals every day. And that, day by day, becomes your New Year Evolution.