Thursday, June 12, 2008

Don't drop the "D" Bomb!

Managing yield in spas has become a hot topic of late. Excess capacity is a challenge nearly every spa operator must face. Ensuring that you don't end up with too much unsold inventory is Job One for every spa marketer. And ensuring that employees stay busy and productive is Job One for every operations manager.

Since it's impossible for us to manufacture more weekend days (which usually sell out) we must focus on making our weekdays more productive. How do most businesses try to get customers to buy more? They discount.

Why is discounting the wrong strategy for spas? Because it reduces the cash flow you receive while simultaneously undermining the perceived value of your services. Spas sell an intangible--we're not retailing automobiles, dishwashers or home furnishings. We're not even selling transportation, as airlines do. We sell an experience. This experience is purely elective. No one goes hungry, or loses their job, because they don't go to a spa. That means luxury spas must jealously guard the perception of value.

A big change in perception occurs when you discount an intangible. It calls into question the real value of the experience. It reinforces the fear that the customer may already harbor: is this really worth it? Should I really be paying $120 for an hour massage?

And frankly, that's not why I really hate discounting.

I hate discounting because it's so...pedestrian. Marketing should be sexy. And discounts aren't sexy. Discounts elicit a sort of primitive, knee-jerk response from customers.

Mmm. Discount. Good. Give discount.

Discounting doesn't accomplish our goals as marketers. A discount can result in a burst of cash, but a hangover inevitably follows. When we create an incentive, we want our customers to think that our spas are even more brilliant and desirable than before. Discounts don't do this.

Let's look at another form of incentive: premiums and upgrades. When you offer more to a guest for the same price (more time, a higher value service, a gift with purchase) you have an opportunity to deliver better results and greater guest satisfaction.

Some examples of premiums and upgrades:

Pay for a 60 minute massage and receive a 90 minute session. A $48 value, with our compliments. (Anyone who experiences a 90 minute massage has a very hard time going back to a 60 minute session. Happily, we offer a 75 minute session, which now becomes an easy upgrade.)

Enjoy any full session facial and receive a stress-dissolving complimentary fifteen minute upgrade--a Lavender Scalp Tension Tamer, our UnThai the Knots neck and shoulder massage, a Warm Stone Foot Release. A $30 value, with our compliments.

Experience our new Bamboo Massage and take home our addictive Balinese Bamboo Sugar Scrub. A $24 value.

For every $150 in gift card purchases you make, receive a gift certificate for an hour-long Exotic Pedicure. Yours to keep or give! A $68 value.

What do you notice about these offers?

1. They showcase the other wonderful products and services that your spa has to offer.

2. They help guests understand new ways to improve and enhance their visit (this one, but future visits too)

3. They excite the imagination rather than just appeal to the basic impulse to spend less money.

4. They enable our team to perform more advanced and premium services, making it easier for them to suggest these treatments to other clients.

5. They fill our team's schedule, leveraging our greatest asset: time. Stabilizing demand enables you to retain better employees.

When creating incentives, it's important to "change it up." Discounts are notorious for training customers to just wait for the next price cut.

Never say always. Any promotion must be offered for a "limited time only," and "Supplies are limited." Put expiration dates on your offers.

Special offers and incentives are not an all-you-can-eat buffet. Make sure you include language that says, "may not be combined with any other offers or promotions, including series discounts."

Premiums and upgrades enable you to test different offers. Perhaps you'll repeat certain successful offers that work well for you. For example, our gift card/pedicure promotion has become a holiday standby at Preston Wynne. Clients love it, and it works very well for our spa.

We put expiration dates on our promotional gift certificates; even in states where gift certificates cannot expire, it's entirely proper and legal to expire promotional gifts and incentives.

If yield management is not a concern for your spa now, one thing is certain: it will be. There is something very exciting about selling such a perishable product. It requires exquisite reflexes, the ability to read between the lines of the appointment schedule and almost instinctively anticipate shifts in demand.

E mail marketing is a tool that's indispensible in today's revenue management programs--guests can opt in to your "last minute offers" list. This self selected, highly motivated group will be very responsive to your e mail messaging, and it prevents the rest of your clients from being "spammed" with offers they don't want--offers which may even negatively impact their perception of your spa.

The sight of an empty treatment room makes any good spa manager a little bit crazy. But it's imperative to create incentives that build your brand and drive higher levels of customer satisfaction--not just to make the cash register ring.