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!

Thursday, March 26, 2009

March Madness: a grassroots marketing story

I love being a spa marketer, and cooking up wonderful new ways to promote spas. But more and more, I love other people's ideas (OPI.)

This idea comes from Preston Wynne, but more precisely, from a Preston Wynne employee, one of our newest.

We had a team retreat in February and created "three commitments" for the first half of the year. One of these commitments was, "Do something you've NEVER done to market the spa in a new way."

Where do the best new ideas come from? Your new people.

Our newest esthetician came to me and asked me if she could have permission to send out her own "March Madness Special." She wanted to send an invitation to any client who had not yet rescheduled with her to come in and enjoy another facial treatment, and, as her gift, she would lavish them additional thirty minutes of upgrades.

She didn't want or expect to be paid for this time. It was her gift to them.

Employees often forget that spas are making a contribution too, when a service is given away using time that could otherwise be sold. But Jennifer "got" that. She knew this was an equal contribution. Our mutual unsold time could be invested, at no cash expense, to bring her customers back in. She thought that was a pretty good deal. She was more interested in generating activity than in being compensated for every minute of her time. She knew that she was sowing the seeds to grow her clientele. And she was delighted that we were willing to go along with her plan.

Fussy marketing maven that I am, I had to control my impulse to refine Jennifer's offer. "March Madness" isn't a phrase you'll find in my copywriting. Was it too shrill? Was it incongruent with our brand? But I controlled my impulse to control, because I didn't want to squelch her radiant enthusiasm. This was a fantastic idea, and it was totally aligned with our team Commitment. These are moments that managers dream about.

Jennifer told a few of her co workers about her idea. Two others joined the "March Madness" promotion. Others pooh-poohed the idea of "working for free." The Madwomen busily prepared their personal offers, and put them in the mail. Jennifer herself mailed out 70 cards. Their energy was contagious. Even the skeptics were curious about what was going on.

We ended up crafting an offer for the estheticians and for the body therapists, so we'd have a SKU in the system for each of the unpaid "Madness" treatments. Other than that, this was grassroots marketing all the way. Into the mail their cards went, and we waited for the response.

It was swift and enthusiastic. Jennifer's book began to fill. So did Elena's, the first massage therapist to get on board. Word traveled quickly, and the "Madness" spread.

In fact, this offer has garnered the best response of any we've done this year. Why?

1. It's personal. It came from their service provider, not from the "business."
2. It's timely. It touched them at the moment they were ready for another treatment, and leveraged the fresh memory of their great spa experience.
2. It was sent via snail mail. Say what you will, but internet marketing fatigue has set in. A hand addressed card is a real attention grabber these days. If you're finding that your e mail blasts are generating fewer returns than they used to, mix it up!
3. It's a great value. Full stop.

This offer is also one of the best business builders we've done. Why?

1. It is focused on creating the behavior that we need most from our clients: repeat visits. It cements the relationship.
2. It showcases us at our best, in a longer-format treatment that will deliver more benefits to the client. It's not our "base sticker price" treatment. It introduces clients to irresistible upgrades they might not otherwise have sampled, and they'll be back for more.
3. It shows our staff that they have influence over their clients, and builds their confidence. Think the "Madwomen" will be shy about inviting these clients back? Probably not.

Have a great grassroots marketing story? Share it with me!

Monday, March 16, 2009

The Gift Horse Rides Again...

Time to dust off your gift card refund policy and make sure your team knows how to handle the influx of requests that will be coming your way.

Thanks to holiday promotions that we run, clients often buy gift cards for their own use. Sadly, with layoffs on the increase, they're hoping to put the money from this purchase back in their pocket. My operations director Nandita reported to me today that she's fielded three calls in the last few days from guests requesting refunds.

Our policy is to provide cash refunds only within the first two weeks after a purchase.

A client making this request is probably abashed, if not mortified. Make sure your team knows to handle them with kid gloves--and the right amount of empathy. Have them explain your policy gently, if in fact you don't offer refunds.

If you do give cash refunds to gift purchasers, brace yourself!

With cash flow slowing, and operating capital in short supply, gift sales are one of the few ways that spas can raise money. That cash is essential to your health. Hang onto it for dear life!

Of course, you can make a case-by-case call, just as you would for any customer service situation. If you make the business rules, you can break them too. It's always worth weighing the cost of being a stickler.

As my dear friend Holly Stiel tells us, "Being Right is the Booby Prize!"

Monday, March 2, 2009

Coming Soon to a Spa Near You: Unions!

I'm a small business owner who voted for President Obama, with one big reservation: his support for the controversial "Employee Free Choice Act," which fundamentally changes the process by which employees can be organized by a labor union.

According to the National Federation of Independent Business, under the new card-check system mandated by the Employee Free Choice Act, "a union gathers authorization cards signed by workers that express their desire to unionize. The unions would be able to collect these cards from your employees and independent contractors for as long as it takes to get 50 percent plus one," says author Lena Anthony, who penned an article on the topic for the current issue of NFIB's My Business magazine. (

Under current law, the "card check" system is a voluntary option for companies. However, the preferred method for most employers is a secret ballot, which is supervised by the National Labor Relations Board.

"The NFIB believes a secret ballot election administered and supervised by the NLRB is the only way to protect the integrity of a worker's right to vote because it is a more accurate indicator than authorizing cards of whether employees actually wish to be recognized by a union. Each employee's choice is made in the privacy of a voting booth, with neither employer or union knowing how the individual voted," explains Anthony.
Enabling employees to vote privately on whether to unionize seems to be the best way to prevent manipulation and intimidation by either the employer or union organizers. The bill, named the "Employee Free Choice Act" (remember the "Clear Skies Act"? Sounds like the same folks named this one) there is an implication that employees currently don't have a free choice. Hello? Secret ballot? Reminds me of how we elect...a President!

Call me an idealist, but my belief is that if all businesses were run well and run ethically, we wouldn't have a demand for labor unions. Alas, we know that there are plenty of badly run businesses out there, and employees that are badly treated, and in a bad economy, things will likely get worse.

I think it's a testimonial to the core values of the spa industry that there are few unionized operations. However, unions would take a dim view of my perspective because like all other institutions, they now exist, in part, to perpetuate themselves as institutions. They need and want more money, like institutions do.

Yet union coffers have been dwindling since the 1980's. Perhaps the decline in labor union dues is a sign that the "price value" equation offered by unions has lost some of its appeal--after all, union representation is a service that employees pay for.

However, the conclusion that's been drawn in Washington by politicians that rely on union support is that this decline is due to the fact that it's too hard to organize. Hmmmm. I realize the President owes a debt of gratitude to organized labor for his victory, but I would like to finally see a President who pays more than lip service to the idea that this nation is sustained, built and ultimately healed by small business. And I've yet to meet a small business owner that thinks things run better after their company was unionized.

As hard as it is to make a go of it now, if the Employee Free Choice Act becomes reality, your path to profitability will be that much steeper. Don't think you're safe because you're small; it's actually easier to unionize small businesses. Under the card-check system, you won't even know you've been organized until you receive the notification that your spa is, voila, a union shop, says NFIB Executive Vice President Dan Danner. "Then the clock starts ticking for you to agree on a contract. If you can't agree on a contract within 120 working days, the Employee Free Choice Act mandates compulsory, binding arbitration on the employer and the employees as part of the collective bargaining process."

If they're forced into a collective bargaining situation, I know plenty of spa owners who will throw in the towel. We all know that there are easier ways to make a living than by employing people, even without having to navigate the delicate protocols of operating a union shop. Many an esthetician-turned-spa owner will likely just turn esthetician again, and slip off into the peace and quiet of a more profitable private practice. (And heaven forfend, we'll have yet another batch of spa consultants flooding the market!)

Personal service businesses are old school, old economy, and often labors of love. When labor doesn't love us back...beleagered small business owners will find other ways to express our entrepreneurial urges. And I guarantee you they will involve fewer, if any, employees.

Unfortunately, we small business owners are a squirmy bunch. We're independent, we don't play well with others and we're politically all over the map. (Instead of lobbying, we'd rather do something productive--like generate two-thirds of the jobs in this nation.)

If our new government is serious about job creation, the first order of business is to ensure that it's easier, not harder, for companies to succeed, and to keep employing the workers we currently have. I desperately hope that one of President Obama's first "shovel ready projects" isn't digging a grave for small business.

Please contact your US Senator, forward or excerpt this blog wantonly, and learn more about the Employee Free Choice Act.

Tuesday, January 27, 2009

The Recession and Your Spa Business: What's Ahead?

How did you start your day today? If you’re like me, you attempted to divine what sort of mood the country was in when you got up, checking the news as you got your game face on. The big story (as it’s been for awhile) was layoffs. I’m sure we were both wondering what all the economic doom and gloom meant for our discretionary-income driven spa businesses.

I have to say, tonight I feel I am a bit closer to getting my arms around this confusing mess. I had the good fortune to hear Christoper Thornberg, an economist, speak at my Entrepreneur’s Organization chapter event in Palo Alto. (If you own a business with at least $1 million in annual sales, you should join your local chapter of this brilliant business organization—now!)

Thornberg is an expert in the study of regional economies, real estate dynamics, labor markets and business forecasting. He’s a principal at Beacon Economics, an economic research and consulting firm that specializes in real estate markets, local economic development, and public and private policy issues. As part of the California Council of Economic Advisors, Dr. Thornberg advises State Controller John Chiang on the state’s crucial economic issues.

During his lively and often very funny talk (I think he might be able to bill himself as the Lewis Black of Economics) I took copious notes, hoping to absorb and share as much of it with you as possible. One thing the spa industry doesn’t do much is look outward. Indeed, we’ve spent years congratulating ourselves on our fabulousness. So it’s a real blow to our pride to realize we’re subject to the same laws of business gravity as everyone else. And that, perhaps, we are far less prepared than many other businesses to weather this storm.

Here are some of the key ideas I was able to take away from Thornberg’s talk.

- Recessions follow huge imbalances. (See: dot bomb) For this one, we had three big ones: housing, finance, and excessive consumer spending. Before they blow up, these massive imbalances/bubbles are usually accompanied by what he calls ‘the four most dangerous words in economics’: “This time it’s different!” (If you still believe that, I have a rental property in Arizona I’d like to sell you.)

- We need to stop watching what Wall Street does, and looking to the stock market as a barometer of things to come. I’ve already resolved: no more reading the Wall Street Journal in the morning. Published at ground zero of the economic collapse, it’s immersed in its own toxic habitat of doom and gloom. He called equity markets “the thirteen year old daughter of the economy”—in other words, major drama queens. He quoted a Wall Street financial advisor, who proclaimed late last year that “there are two positions out there—cash, and fetal.” Do we really want to believe this? If we’re to succeed in this climate, we have to make our own weather (see my previous blog on this subject!)

- It’s never as good as you think, and it’s never as bad as you think. Consumer and business sentiment has rocketed from denial (the party is never going to end; the housing market is going to have a soft landing) to abject hysteria (the US economy has forever lost its mojo, and we’ll be a bit player on the world stage going forward, a new Dark Age is beginning, etc.) A couple of years back, Thornberg was one of a few lonely Bears, a party pooper derided for his predictions of financial mayhem and a disastrous real estate crash. Interestingly, he’s now a Bull--while most everyone else is rending their garments and sprinkling ashes on their heads.

- This is not your mother’s Depression. Thornberg scoffs at the notion that we are heading into a depression. However, he’s unstinting in his description of the fine mess we’re in: the worst recession since World War II. As he says, “It’s a normal very bad recession.” His estimate: two more years of hard slogging.

- Unemployment is a lagging indicator. The layoffs that are happening now are not predictors of the future, but symptoms of excesses the past. Companies are finally shedding jobs in response to the falloff in demand for their goods and services. Another great reason not to listen to CNN, MSNBC, etc., while getting ready for work!

- The majority of the drop in consumer spending has happened in the automotive sector and in the decline in the price of gas. (Maybe a reporter will throw that in at the end of the story, but it won’t be the lead.) Services are selling better than products. My controller Roxanne showed me a newspaper story with a graph the other day showing how badly sales had dropped during the 2008 holiday season from 2007. The dropoff was downright dizzying—til you looked more closely at the chart and saw the graph was calibrated in hundredths of percentage points. With all the finger pointing going on right now about “who’s to blame,” it’s amazing to me that the media does not recognize their role in throwing gas on the flames. Granted, we do know that the luxury sector, which lagged behind others in going off the cliff, finally caught up with a startling 35% decline during the holiday season. (Hey, what do we expect for calling the super-affluent demographic “recession proof”?)

- Our national obsession with stopping foreclosures overlooks a very important fact: people shouldn’t keep homes they can’t afford. Foreclosures are just a symptom of the overconsumption that drove this meltdown. Thornberg says simply, “Foreclosures are not necessarily bad for the economy.” To put it in terms business can relate to, once people stop throwing 70% of their income at their mortgage, they can afford to buy other stuff. Of the credit damage that is occurring to many consumers, another businessperson I know remarked, “A couple of years from now, it’ll just be like having a tattoo: a mistake a lot of us made in our past.”

- Bank consolidation ( failure) is going to be a fact of life. 8000 banks will become 4000, says Thornberg. If you have more than $250,000 in a small bank, get it out of there, is his advice. The words “bank failure” strike terror into our hearts, since this phrase is inextricably linked in our minds to the Great Depression. But bank consolidation is inevitable. It will take another two years for all the bankrupt banks to admit that they’re broke. California, says, Thornberg, is filled with these walking-dead “zombie banks.”

- Our concern with ‘what the banks did with our TARP money’ and politicians’ desire for strict accounting demonstrates our and their lack of understanding of how banks work. “It’s like pouring a quart of water into a bucket that’s half full and asking, ‘where did our water go?” Bank lending is down in large part to a decline in demand. Businesses are not expanding right now; they’re shrinking. You don’t borrow money to shrink. That is, unless, you’re broke. And banks aren’t lending to companies that are broke (any more.)

- When banks tighten up lending, the Fed can print more money and put it into the supply. When banks loosen lending practices, the Fed pulls money back out of circulation. (We hope!) Thornberg says banks are still lending money, but not making risky loans. He gave the example of a builder he recently sat next to on a plane. The builder was lamenting the lack of financing for his projects, yet he refused to pay a higher interest rate, inject more than 7% of his own money into a project, or sign a personal guarantee. This may be how it was working a couple of years ago, but not any more. Businesses have to shoulder more risk.

- “We’re on the back end of a twelve year bender and we’re waking up with the mother of all hangovers.” The good news to me here is that, in the words of the twelve-step world, we’ve admitted we have a problem. If we successfully complete our economic rehab program, Thornberg sees positive growth in the second half of 2010. That program should include middle class tax cuts, he says, and helping people save more by spending less. It wasn’t that long ago that the savings rate in the US was 10%. In the past few years, we stopped saving, and developed a real talent for living beyond our means.

- Consumer and business weakness will continue for awhile, though some businesses should see growth by the fourth quarter of this year. Remember, we’ve been in this recession for awhile. It’s not just starting. And one of the few ‘laws of gravity’ in economics is that recovery is inevitable—the market digests its mistakes and slowly gets healthier. But for many of us operating businesses, it’s a grueling test to see who will survive.

- This is the time to look for opportunity. For example, falling home prices mean that those of us with California companies can compete for workers with the rest of the country. There’s been a huge exodus of talent from our state because of the high cost of housing. There’s also opportunity awaiting us in the shakeout, which will correct market saturation. Let’s face it; the country has a few too many spas and spa vendors. I hate to say it, but every time I’ve hit the trade show floor lately I wonder to myself, “Can all these companies possibly be necessary?” Our abundance-loving culture makes it hard to admit such un-Kumbaya thoughts, but we’ll be a healthier industry when we have healthier players. In the meantime, hunker down and renegotiate everything. Have a lease? You may be surprised at your landlord’s willingness to lower it if you commit to a new, longer term. Push back when vendors raise prices.

- Cash is king; if you’ve got it, your company will have the opportunity to buy competitors’ assets for fire sale prices. (See: Warren Buffet. In fact, see his new biography, Snowball. You’ll see as you read it that now is the time to build your empire. If you’d rather not tackle this massive book, which chronicles such fascinating details as the type of packaged snacks he enjoys, just head to the children’s section in the bookstore and re-read the Tortoise and the Hare.) There’s even a chance your competitor will suddenly close his doors and a desperate real estate broker will call you with an opportunity to acquire a fully equipped, operational, just-add-water spa—for the cost of rebranding the place. Leasing companies need to keep the lights on and the parking lots full in their shopping centers. A spa owner I know just walked into precisely this opportunity.

I have to say, I found Thornberg’s talk tonight to be refreshing and even encouraging. I think most of us have been paddling around in the murky pool of this recession, wondering how deep it really is. Just experiencing the sensation of your toes touching the bottom is comforting--even if you’re still in over your head!

Wednesday, January 7, 2009

High Heals

The new Spa Finder Trend Report, Susie Ellis' excellent overview of industry influences, cites as a key trend the increasing acceptance of "energy work" in spas. On the opposite end of the spectrum, we know that cosmeceutical ingredients and medical aesthetic technologies continue to grow in sophistication. What do these two trends have in common?

At our recent Holiday Client Appreciation Party, we offered an array of free mini spa treatments to our guests. The two most popular "attractions"? An esthetician who was giving Reike facial treatments, and a therapist who specializes in Intuitive Flower Essence Readings.

Now, we're located in the very workaday Silicon Valley. For all our innovations in technology, we are not a terribly adventurous lot. (We're not Marin County. We wear sensible shoes and carefully sanitize our yoga mats.)

Cosmeceutical and medical spa innovations appeal to the client who wants to receive profound benefits from their self-care investment. Energy work is sought out by clients who want to go beyond the basic spa benefit of relaxation. But within these very different modalities, there's a common thread, and that's healing. We may not think of aesthetic medical procedures as healing, but the end result is repaired self esteem. That's emotional healing.

These distinctions may seem like semantics, but they are actually clues to your clients' deeper needs, the kind of needs that will motivate them to spend discretionary income during a severe recession.

The rules of the game have changed. Clients still want--more than ever--what we have to offer. But to justify their choices, the benefits they receive from spa services must be unassailable. How effective are you at articulating the benefits of what you offer?

Because your clients must take their cue from you: they need to be able to explain why they do what they do. They will have to make a case for their choices to family members, friends, colleagues. "I'm worth it!" just doesn't cut in the the cold light of 2009. Why is your spa worth it?

Have you retooled your marketing copy to bring it into alignment with the newly sober mood of today's consumer? (Hint: "indulgence," "luxury," "exclusivity" are soooo 2008!)I can't emphasize enough the importance of relanguaging the spa experience, not just in your brochure or website, but for your employees. We can't win the new game playing by yesterday's rules, or with yesterday's scripts.

Most spas have understood for years that at the heart of what we do is healing. We may have lesser or greater degrees of comfort with that concept. But during a year when everyone is "hurting," healing is one of very few activities everyone can justify.

Another deep need that spas have almost unwittingly found themselves meeting is consumers' craving for fostering deeper connections and more meaningful relationships with special people in their lives. Where do you foster this sort of connection? Perhaps over a cup of coffee at Starbucks, but also, particularly during special occasions, within the sanctuary provided by spas. The notion of spa-as-sanctuary is hardly new (as evidenced by the number of spas bearing this name or a version of it.) But the reason for seeking sanctuary now is not just about zoning out in splendid isolation--increasingly, it's about finding the ideal environment for enjoying quality time with friends and family. ("Girlfriend Getaways" were one of the few categories of travel that grew last year.)

American consumer culture has turned a page. To find our place in this unfamiliar new story, spas must make sure we remain relevant. And that relevance comes from meeting our clients' needs for healing, meaning, and connection.