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?
Showing posts with label spa sales. Show all posts
Showing posts with label spa sales. Show all posts
Thursday, June 4, 2009
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!
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!
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!
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!
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.
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.
Monday, February 25, 2008
The Hard Answers on the Soft Sell
The news from the massage department isn’t good. Sales are down for the third consecutive quarter. Concerned, Mary Sayles, the spa director, calls in her new massage department lead, Josh Neiderman.
“I don’t think we should use our guests’ relaxation time to sell,” Josh says, in response to Mary’s grim report. They’re seated in her small office, next to a defective mag lamp awaiting return. “I believe that a massage should be performed in silence.”
“Do you think that our clients believe that too?” Mary asks.
“Yes,” says Josh. “I do.”
“But,” the spa director continues, “Aren’t there times during the treatment that you have to communicate with the guest? You know, to let them know it’s time to turn over, or ask them if the pressure is comfortable for them?”
“Of course,” replies Josh. “But that’s important to giving a good treatment. And it’s very brief.”
“Might you also ask if a tight area you’re noticing in their body is tender or sensitive?”
“I get what you’re saying,” Josh concedes. “Of course it’s not a 100% silent treatment. But I don’t want to subject our guests to a sales pitch. I don’t think the therapists should talk about products in the treatment room. That’s sacred ground to us.”
“Don’t we use products in the treatment?” Mary pursues, attempting to sound neutral. Her eyes are not focused on Josh, but fixed on the display of beautifully displayed body care products that sit virtually untouched in the spa’s retail area behind him.
“Yes, we use a massage oil blend with aromatherapy, and we use that analgesic gel on the tight areas,” Josh says patiently. “That’s protocol.”
“But you don’t think the client should know what you’re applying to their skin? I know I’m always curious about what’s being used on me,” Mary replies, warming to the subject. “And I bet some of them are very curious about our heat packs. Do they ask about those?”
“All the time,” concedes Josh. “But my job is to help them relax and get out of their head. If we spend the whole treatment talking they’re not going to unwind.”
Mary sighs softly. This is familiar ground for her, after ten years of operating spas. She’s freshly back from a trip to the local mall to inspect the latest lines at Bath and Body Works, where she witnessed a bustling trade in “professional” spa brands that had recently gone to the Mass Merchandised Dark Side.
“Why,” she asks herself, “can everyone but a real spa therapist sell spa products? No wonder these companies are abandoning us. We can’t seem to sell our way out of a wet paper bag.”
Does this scenario sound familiar?
Underlying Josh’s concerns about the client are some larger fears. The assumptions he makes about the client, which he’d likely represent as “intuiting” their needs, are based on his own personal limitations and anxieties. First and foremost, the social style of most spa therapists is not naturally given to perform the act we commonly call “selling.” This is because nurturers, healers and caregivers gravitate toward their work to enjoy a very different interpersonal dynamic. In the case of many massage therapists, their social style led them to a career that would enable them to avoid the kind of stresses, discomforts and conflicts that are common in the world of business and commerce. (Or what many second-career massage therapists call the “rat race.”)
Ask most people what “selling” is, and the terms you’ll hear are negative ones. Try this word association game: ask a few people to associate a word to “Salesman.”
The most common response you’ll get?
“Pushy.”
The predominant social style among massage therapists has been tagged by one popular categorizing system with the moniker “Amiable.” Amiables are relationship-driven and thrive as part of a team. Some of your therapists have a pinch of “Analytical” in the mix. These are the ones who are studying to become physical therapists, and are interested in the mechanics of the body. The friendly and voluble ones have more “Expressive” styles, perhaps garnering the occasional complaint from clients about chit chat in the treatment room, but logging the best retail ratios. You will rarely find the Type A “Driver” in a massage room. (At least, not for long. They’re the ones planning to open their own facility.)
Why does social style matter?
When trying to encourage sales-averse employees to talk about home care with their clients, not to mention long-term programs and other opportunities, it’s important to understand what motivates them, deep down. Mary Sayles is a veteran spa director, which means she’s more results-driven than the people she supervises. While relationships are important to her—the spa industry would have driven her completely around the bend by now, if not—her job depends on delivering measurable results. As well, Mary is probably more willing to take risks. There’s a good chance she views herself as a peer of the spa’s clients, even accomplished, assertive and affluent ones.
Our friend Josh is another story. As a care giver, he may be intimidated by the stressed-out Type A’s that frequent the spa. Like most of us, he projects his own beliefs, fears and limitations on the guests he works with, and overvalues his intuition, or ability to “read” people, in order to justify his reticence. He believes that Mary doesn’t understand what it’s like in the treatment room.
How can Mary meet Josh halfway and accomplish her goal of ensuring that there is a dialogue about home care in the massage experience?
1. Demonstrate viscerally “why” home care supports the therapeutic experience. The Amiable employee must understand how the relationship will be enhanced by this behavior. Mary knows well that handing her Amiable massage therapists a piece of paper with their sales goal on it and declaring “make it so!” is the quickest way to incite a stampede for the exits. Not much more effective is the exhortation “You need to educate your clients!” An effective learning modality is to give the employee a treatment and demonstrate the desirable behavior. The employee will have an opportunity to experience how good it feels when it’s done properly. Give a role play demonstration of what to say and when to say it, during a massage session. Demonstrate what it means to “educate”, then have the massage therapist switch roles and do it themselves.
2. Make the scary familiar with role playing. When law enforcement officers are being trained, they go through intense role-playing exercises called “scenarios” that enable them to experience the scariest, most heart-pounding situations they’ll encounter on the job and rehearse them. Mountain climbers practice on climbing walls. Include role-play scenarios in your training process.
3. Narrate. Mary has already included a variety of home care products in the massage treatment, the first step. It is the therapists’ responsibility to introduce the formulas being used and explain their purpose and benefits. This is a natural entrée for opening up a discussion of home care rituals at the end of the session. Josh quietly says, while applying the product, “This Sage Analgesic Balm will soothe these sore muscles.” Then, after a moment, he’ll check in and ask softly, “How does that feel?” It would be a curmudgeonly client indeed who’d object to this type of benefits-driven and personalized interaction.
4. Automate the process. Good design supports good salesflow. Mary can add tantalizing visual merchandising in the service areas to stimulate the guest’s shopping urges. A checkout “lounge” would ensure that her guests pause before departing, enabling the spa to present the home care and rescheduling opportunity while giving them a gentle way to transition from spa mode back to reality. Sampling, custom blending and play areas encourage even more engaged interaction with the spa’s products. The longer guests stay in the spa, the more money they’ll spend—and the more value they’ll feel they got from their experience.
5. Get everyone involved. Most therapists are receptive to the idea of a split commission with the front desk staff if they know they’ll be getting a piece of a larger pie. Getting the support team on board increases their income and job satisfaction, too. Most spa software enables you to create customized split commissions.
6. Find the words. Excessive reliance on scripting has gotten some luxury properties a bad rap lately, but if Mary doesn’t offer a “lexicon” of great words and phrases for her team to use, they may not be able to extend the invitation persuasively. After all, they weren’t hired on as copywriters. People that are wonderful with their hands are often a bit less wonderful with their mouths. Mary can provide a valuable service when she helps them overcome awkwardness with helpful phrases. If she’s smart, she’ll post them in her prep areas so they’re easy to master.
7. Encourage the team to share success stories. Mary probably has therapists on her team that have some wonderful personal “scripting” that would work for Josh, with perhaps a tweak or two to make it his own. Round table conversations at team meetings are one of the most valuable forms of training. Mary “can’t be a prophet in her own land”—in fact, it’s more like being the invisible adult in the Charlie Brown cartoon. All employees hear from her when she tries to explain “how easy” it is to recommend home care is “Wah wah wah wah wah.” When another therapist offers a tip or technique it’s much more likely to be accepted and adopted.
8. Inspect what you Expect. Mystery Shopping is an indispensable tool for monitoring performance. Mary must make sure she devotes plenty of energy catching people doing things right, too.
9. Value sales behavior appropriately. Since home care is significantly more important to an esthetician’s success than a massage therapist’s, it’s important for Mary to pick her battles. We’ve all been taught since childhood that we need to devote most of our time to fixing our weaknesses, and managers invariably spend the bulk of their time dealing with the shortcomings and issues of their poorest performers. This is one of the biggest productivity traps in any business. Our highest return comes from increasing our strengths. As Jim Collins points out, it’s not just important to have the right people on your bus, but they need to be in the right seats. If Josh is fantastic at retaining customers for the spa, Mary might just find someone else on the team to ensure that they get the opportunity to learn about and buy the spa’s fabulous home care offerings.
It’s six weeks and two coaching sessions after Mary and Josh’s frustrating exchange; the spa director stops to congratulate him on his increased retail ratio as well as his higher client retention ratio. Josh feels less harried by Mary, who has stopped issuing vague exhortations to “sell more,” in favor of supportive coaching and improved salesflow processes.
Josh seems to be blossoming. Mary has observed that the front desk employees are more attentive to the therapists and the clients alike, and truly acting like teammates. By pooling the concierge team’s sales commissions, she’s been able to keep their eye on the customer service ball, and not let their new incentive devolve into an overt competition with one another for sales.
“Yeah, Jennifer likes to joke that we’re “in business together,” says Josh, referencing the engaging spa concierge who has been racking up “assists” for him at checkout. “Splitting my commissions has actually doubled them.”
“That’s great,” she responds. “You deserve it.”
“I don’t think we should use our guests’ relaxation time to sell,” Josh says, in response to Mary’s grim report. They’re seated in her small office, next to a defective mag lamp awaiting return. “I believe that a massage should be performed in silence.”
“Do you think that our clients believe that too?” Mary asks.
“Yes,” says Josh. “I do.”
“But,” the spa director continues, “Aren’t there times during the treatment that you have to communicate with the guest? You know, to let them know it’s time to turn over, or ask them if the pressure is comfortable for them?”
“Of course,” replies Josh. “But that’s important to giving a good treatment. And it’s very brief.”
“Might you also ask if a tight area you’re noticing in their body is tender or sensitive?”
“I get what you’re saying,” Josh concedes. “Of course it’s not a 100% silent treatment. But I don’t want to subject our guests to a sales pitch. I don’t think the therapists should talk about products in the treatment room. That’s sacred ground to us.”
“Don’t we use products in the treatment?” Mary pursues, attempting to sound neutral. Her eyes are not focused on Josh, but fixed on the display of beautifully displayed body care products that sit virtually untouched in the spa’s retail area behind him.
“Yes, we use a massage oil blend with aromatherapy, and we use that analgesic gel on the tight areas,” Josh says patiently. “That’s protocol.”
“But you don’t think the client should know what you’re applying to their skin? I know I’m always curious about what’s being used on me,” Mary replies, warming to the subject. “And I bet some of them are very curious about our heat packs. Do they ask about those?”
“All the time,” concedes Josh. “But my job is to help them relax and get out of their head. If we spend the whole treatment talking they’re not going to unwind.”
Mary sighs softly. This is familiar ground for her, after ten years of operating spas. She’s freshly back from a trip to the local mall to inspect the latest lines at Bath and Body Works, where she witnessed a bustling trade in “professional” spa brands that had recently gone to the Mass Merchandised Dark Side.
“Why,” she asks herself, “can everyone but a real spa therapist sell spa products? No wonder these companies are abandoning us. We can’t seem to sell our way out of a wet paper bag.”
Does this scenario sound familiar?
Underlying Josh’s concerns about the client are some larger fears. The assumptions he makes about the client, which he’d likely represent as “intuiting” their needs, are based on his own personal limitations and anxieties. First and foremost, the social style of most spa therapists is not naturally given to perform the act we commonly call “selling.” This is because nurturers, healers and caregivers gravitate toward their work to enjoy a very different interpersonal dynamic. In the case of many massage therapists, their social style led them to a career that would enable them to avoid the kind of stresses, discomforts and conflicts that are common in the world of business and commerce. (Or what many second-career massage therapists call the “rat race.”)
Ask most people what “selling” is, and the terms you’ll hear are negative ones. Try this word association game: ask a few people to associate a word to “Salesman.”
The most common response you’ll get?
“Pushy.”
The predominant social style among massage therapists has been tagged by one popular categorizing system with the moniker “Amiable.” Amiables are relationship-driven and thrive as part of a team. Some of your therapists have a pinch of “Analytical” in the mix. These are the ones who are studying to become physical therapists, and are interested in the mechanics of the body. The friendly and voluble ones have more “Expressive” styles, perhaps garnering the occasional complaint from clients about chit chat in the treatment room, but logging the best retail ratios. You will rarely find the Type A “Driver” in a massage room. (At least, not for long. They’re the ones planning to open their own facility.)
Why does social style matter?
When trying to encourage sales-averse employees to talk about home care with their clients, not to mention long-term programs and other opportunities, it’s important to understand what motivates them, deep down. Mary Sayles is a veteran spa director, which means she’s more results-driven than the people she supervises. While relationships are important to her—the spa industry would have driven her completely around the bend by now, if not—her job depends on delivering measurable results. As well, Mary is probably more willing to take risks. There’s a good chance she views herself as a peer of the spa’s clients, even accomplished, assertive and affluent ones.
Our friend Josh is another story. As a care giver, he may be intimidated by the stressed-out Type A’s that frequent the spa. Like most of us, he projects his own beliefs, fears and limitations on the guests he works with, and overvalues his intuition, or ability to “read” people, in order to justify his reticence. He believes that Mary doesn’t understand what it’s like in the treatment room.
How can Mary meet Josh halfway and accomplish her goal of ensuring that there is a dialogue about home care in the massage experience?
1. Demonstrate viscerally “why” home care supports the therapeutic experience. The Amiable employee must understand how the relationship will be enhanced by this behavior. Mary knows well that handing her Amiable massage therapists a piece of paper with their sales goal on it and declaring “make it so!” is the quickest way to incite a stampede for the exits. Not much more effective is the exhortation “You need to educate your clients!” An effective learning modality is to give the employee a treatment and demonstrate the desirable behavior. The employee will have an opportunity to experience how good it feels when it’s done properly. Give a role play demonstration of what to say and when to say it, during a massage session. Demonstrate what it means to “educate”, then have the massage therapist switch roles and do it themselves.
2. Make the scary familiar with role playing. When law enforcement officers are being trained, they go through intense role-playing exercises called “scenarios” that enable them to experience the scariest, most heart-pounding situations they’ll encounter on the job and rehearse them. Mountain climbers practice on climbing walls. Include role-play scenarios in your training process.
3. Narrate. Mary has already included a variety of home care products in the massage treatment, the first step. It is the therapists’ responsibility to introduce the formulas being used and explain their purpose and benefits. This is a natural entrée for opening up a discussion of home care rituals at the end of the session. Josh quietly says, while applying the product, “This Sage Analgesic Balm will soothe these sore muscles.” Then, after a moment, he’ll check in and ask softly, “How does that feel?” It would be a curmudgeonly client indeed who’d object to this type of benefits-driven and personalized interaction.
4. Automate the process. Good design supports good salesflow. Mary can add tantalizing visual merchandising in the service areas to stimulate the guest’s shopping urges. A checkout “lounge” would ensure that her guests pause before departing, enabling the spa to present the home care and rescheduling opportunity while giving them a gentle way to transition from spa mode back to reality. Sampling, custom blending and play areas encourage even more engaged interaction with the spa’s products. The longer guests stay in the spa, the more money they’ll spend—and the more value they’ll feel they got from their experience.
5. Get everyone involved. Most therapists are receptive to the idea of a split commission with the front desk staff if they know they’ll be getting a piece of a larger pie. Getting the support team on board increases their income and job satisfaction, too. Most spa software enables you to create customized split commissions.
6. Find the words. Excessive reliance on scripting has gotten some luxury properties a bad rap lately, but if Mary doesn’t offer a “lexicon” of great words and phrases for her team to use, they may not be able to extend the invitation persuasively. After all, they weren’t hired on as copywriters. People that are wonderful with their hands are often a bit less wonderful with their mouths. Mary can provide a valuable service when she helps them overcome awkwardness with helpful phrases. If she’s smart, she’ll post them in her prep areas so they’re easy to master.
7. Encourage the team to share success stories. Mary probably has therapists on her team that have some wonderful personal “scripting” that would work for Josh, with perhaps a tweak or two to make it his own. Round table conversations at team meetings are one of the most valuable forms of training. Mary “can’t be a prophet in her own land”—in fact, it’s more like being the invisible adult in the Charlie Brown cartoon. All employees hear from her when she tries to explain “how easy” it is to recommend home care is “Wah wah wah wah wah.” When another therapist offers a tip or technique it’s much more likely to be accepted and adopted.
8. Inspect what you Expect. Mystery Shopping is an indispensable tool for monitoring performance. Mary must make sure she devotes plenty of energy catching people doing things right, too.
9. Value sales behavior appropriately. Since home care is significantly more important to an esthetician’s success than a massage therapist’s, it’s important for Mary to pick her battles. We’ve all been taught since childhood that we need to devote most of our time to fixing our weaknesses, and managers invariably spend the bulk of their time dealing with the shortcomings and issues of their poorest performers. This is one of the biggest productivity traps in any business. Our highest return comes from increasing our strengths. As Jim Collins points out, it’s not just important to have the right people on your bus, but they need to be in the right seats. If Josh is fantastic at retaining customers for the spa, Mary might just find someone else on the team to ensure that they get the opportunity to learn about and buy the spa’s fabulous home care offerings.
It’s six weeks and two coaching sessions after Mary and Josh’s frustrating exchange; the spa director stops to congratulate him on his increased retail ratio as well as his higher client retention ratio. Josh feels less harried by Mary, who has stopped issuing vague exhortations to “sell more,” in favor of supportive coaching and improved salesflow processes.
Josh seems to be blossoming. Mary has observed that the front desk employees are more attentive to the therapists and the clients alike, and truly acting like teammates. By pooling the concierge team’s sales commissions, she’s been able to keep their eye on the customer service ball, and not let their new incentive devolve into an overt competition with one another for sales.
“Yeah, Jennifer likes to joke that we’re “in business together,” says Josh, referencing the engaging spa concierge who has been racking up “assists” for him at checkout. “Splitting my commissions has actually doubled them.”
“That’s great,” she responds. “You deserve it.”
Monday, March 26, 2007
PRIVATE THOUGHTS: NEW THINKING ON PRIVATE BRANDING FOR SPAS
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.
TODAY’S OPTIONS IN PRIVATE LABEL
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.
“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.
TODAY’S OPTIONS IN PRIVATE LABEL
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.
Wednesday, December 13, 2006
Welcome to the Wynne Business Spa Industry Update!
Welcome to the Wynne Business blog--I'd like to involve you in a frank and engaging conversation about the latest business thinking, trends and market conditions in the spa industry. Each month, if not more often, I'll share my thoughts about the issues that impact spa operators--from small to large. As an avid consumer of conventional business media, I'll also pass along resources and ideas that I find especially useful. (Check out this month's issue of Harvard Business Review for an excellent article on strategies for dealing with low-cost competitors!)
THE BAY AREA SPA LEADERSHIP ROUND TABLE DEBUTS IN JANUARY!
I'm very excited to announce the launch of the Bay Area Spa Leadership Round Table on January 31, 2007. If you'd like more information on this quarterly Round Table, designed to disseminate best practices and provide cutting-edge management intelligence, please contact Program Host Dionne Fountain at df@wynnebusiness.com. Membership is open to spas with annual revenues of $1 million or more, and a different member spa hosts the meeting each quarter.
The three hour format includes a group round table discussion, an expert presenter, and a "case study" in which the host spa can present an idea or issue they'd like group input on. Meetings run from 9:30 a.m. to 12:30 p.m., and kick off with a continental breakfast at 9:15 a.m. Annual membership will be just $100 for four meetings, and up to two representatives of the member business management team may attend.
The Bay Area Spa Leadership Round Table is sponsored by Wynne Business and Spa Trade.
THE BAY AREA SPA LEADERSHIP ROUND TABLE DEBUTS IN JANUARY!
I'm very excited to announce the launch of the Bay Area Spa Leadership Round Table on January 31, 2007. If you'd like more information on this quarterly Round Table, designed to disseminate best practices and provide cutting-edge management intelligence, please contact Program Host Dionne Fountain at df@wynnebusiness.com. Membership is open to spas with annual revenues of $1 million or more, and a different member spa hosts the meeting each quarter.
The three hour format includes a group round table discussion, an expert presenter, and a "case study" in which the host spa can present an idea or issue they'd like group input on. Meetings run from 9:30 a.m. to 12:30 p.m., and kick off with a continental breakfast at 9:15 a.m. Annual membership will be just $100 for four meetings, and up to two representatives of the member business management team may attend.
The Bay Area Spa Leadership Round Table is sponsored by Wynne Business and Spa Trade.
Subscribe to:
Posts (Atom)
