Spa operators have a conflicted relationship with online review sites. On the one hand, there’s few marketing modalities that are so powerful yet so inexpensive (read: mostly free.) On the other hand, there are few marketing modalities that are so utterly out of your control.
Danny Meyer of Union Square Hospitality Group likened publicity to “riding the tiger.” If you can stay on top, that tiger can take you places. Online review sites are like riding a pit bull. Because the pit bull is so much smaller than a tiger, it’s really, really hard to stay on top. Your feet are always dangling perilously close to that dog’s mouth. And it’s going at a flat-out run all the time. You can fall off. The only thing worse than riding the pit bull is realizing that the pit bull has gotten away and is tearing your business to pieces around the corner.
Here’s the way market leader Yelp describes its site: “Yelp is the fun and easy way to find, review and talk about what's great - and not so great - in your local area. It's about real people giving their honest and personal opinions on everything from restaurants and spas to coffee shops and bars.” Sounds harmless and lighthearted enough.
But we all know that review sites are subject to abuse. Competitors can create a pseudonym and post fake reviews trashing your business. This sort of thing makes spa owners crazy. It is exactly this nonsense that makes them throw up their hands and ignore online review sites altogether. I was working with a consulting client the other day who is trying to buy a business on the East Coast.
“What do their online reviews look like?” I asked. It’s a simple way to do some research on a possible acquisition, but just one of many things we look at. We keep the grains of salt close at hand.
“Well, they’re mixed,” replied the would-be buyer, with some trepidations.
“Is the owner actively managing them?” I inquired. The buyer said she’d find out.
In our next conversation, she reported, “She says that she just ignores those.”
I don’t blame her. Unfortunately, sticking your head in the cyber sand is a recipe for trouble.
I have to congratulate Yelp for coming up with programs for businesses that include very useful tools, such as an e mail alert whenever a new review is posted. Many business owners still don’t realize that you can contact Yelpers just by becoming one yourself. (That’s free.)
Because of features like this, Yelp has convinced me to give them money, even as their users alternately torment and delight me. Which means, as I have maintained in my past blogs, that Yelp is simply a mirror of the traditional customer relationship. Treat people well and they will do the right thing. Guarantee their satisfaction with your products and services. Make it right when you learn that you have done something poorly.
I have never asked a Yelper to change a review, no matter how nasty. I have simply contacted them and said, “I wish I’d known about this, and now that I do, I would like to make it right for you. Come back in and have the experience you deserved to have in the first place.” And most of them have responded the way customers traditionally do. They say, “I appreciate the fact that you contacted me. Okay, I’ll give you another chance.” And in every instance where we connected with the Yelper and got them to return, we found that the review was amended or updated. They often mention that they appreciate management’s commitment to customer service.
But wait. Just when I think I have my pit bull walking on a leash wearing a cute little “Preston Wynne Spa” sweater emblazoned with four and a half Yelp stars, I make a disturbing new discovery.
The term “viral marketing” has never been more apt than when describing online review sites. And like a virus, the Yelp community and “Yelpers” are constantly evolving. Of late, I’m worried that there is a new strain of Yelper emerging. I call her the “Super Reviewer.” She is a product, I fear, of too much fawning over the value of “user generated content.”
The Super Reviewer styles herself as a “real” reviewer. Even if she has visited your spa just once, she feels that her flaming is, to quote another famous source of user-generated content, “fair and balanced.” Unlike a normal customer, if she is contacted by the charbroiled business owner, she spurns offers of recompense, equating them to “bribes.” (There’s a worrisome thread in a Yelp community chat in which a couple of these folks discuss their disdain when restaurant owners attempt to curry their favor after a bad review with a redo or a comped meal. How dare we try to change their mind?)
Unlike a real reviewer, of course, the Yelper is spending their own money. How many visits would you make to my spa if you were disappointed or frustrated by the first? Probably just one. That’s another key difference between the amateur and the pro, in the world of reviews. A restaurant reviewer usually visits an establishment several times. (Ruth Reichl’s memoir of her days as the New York Times restaurant critic, Garlic and Sapphires, is a great account of the standards that apply in the “bigs.”)
My recent encounter with a Super Reviewer was a bit surreal. Yelpers often inject a bit of Facebooky “attitude” into their writing, and this review of our cellulite treatment crossed the line from saucy to snarky pretty quickly.
But I take all criticism seriously, regardless of the tone with which it is delivered. Because the messaging interface on Yelp is anonymous, I contacted “Princess” (no joke) with sincere apologies and an offer of a “do over.” This is SOP at our spa, where we guarantee guests’ satisfaction with our treatments. Her reply was polite but firm. The upshot: because of her impeccable standards of objectivity, she would have to stand by her review of our spa. She did offer, inexplicably, to give me an additional “star” for my customer service efforts.
Now this was a bizarre twist. We had taken her money, had not delivered the goods, and I was proffering recompense. I offered to provide her with a gift certificate to use at her convenience. All I needed, I wrote, was a real-world e mail address, and I could send her one of our convenient print-your-own gift certificates.
“Princess” declined once again, but she did suggest that I provide additional training for my employees. Stubbornly, I launched one more message, asking her cheerfully if she could recall the date of her visit so I could determine if her disappointing outcome occurred before or after a recent hands-on skills training for our body therapists. There was no reply. “Princess” had exhausted her patience with this pesky business owner. Her review sits on the website, unaltered, in all its “objective” glory.
During my 15 years in the facial treatment room, I “yelped” to my clients about businesses and restaurants that I enjoyed, hand-writing a page of recommendations when I heard they were visiting a favorite city. Yelp is tailor-made for my natural tendencies as a closet concierge. Yet as I Yelp, I find myself obeying my mom’s admonition, “if you can’t say anything nice, don’t say anything at all.” I may make a minor criticism as part of an overall good review, but I can’t shake the visceral knowledge that business I am reviewing is someone’s livelihood. I’m motivated to write about businesses that I really enjoy, and it’s easy to just ignore businesses I don’t like. This does not mean I am a shrinking violet when it comes to customer service. I am more than willing to stamp my little foot in person, but I have not developed a taste for online vigilantism. There are usually ample channels for direct complaints that should precede a public flogging. Call me old fashioned, but “flaming” someone from an anonymous perch just seems cowardly.
One thing about creating businesses: the way we expect people to use them and the way they actually do are often very different. If the Super Reviewer is an incipient trend, a mutation in the Yelp community, it could hijack the “fun” part of their site and sour businesses on the value of the Yelp merchant services model. After all, that’s where the money is—if I’m not mistaken. If I am denied the opportunity to apply real-world customer satisfaction “laws” in the virtual world, my willingness to sign checks for enhanced merchant services will wane.
Yelp provides lots of helpful prompts for businesses who are responding to Yelp reviews. “A three star review means the customer was satisfied. Keep it short and sweet,” advised a pop-up as I began a message to “Princess.” Apparently there are plenty of business owners who freak out the first time they go to the site and read the vitriol that may have accumulated there. In fact, Yelp is so determined to save you from yourself, Ms. Freaked Out Merchant, that it limits you to five messages a day and won’t let you message a reviewer if they have not replied to your last one. It seems that Yelp spends a lot of time thinking about how to protect its users from the folks who operate the businesses they have pilloried.
Thanks to the internet, and its endless supply of free user-generated content, consumer vigilantism has entered a golden age. The sheer reach of review sites flatter users into confusing their opinions with objectivity. One Yelper I noticed this evening has 50 photographs posted on her page, mostly of her. Rampant self-absorption is the heart and soul of every social networking site, but I wonder if Yelp can keep the Beast from co-opting its essential mission.
Consumer narcissism seems to underly an increasingly accepted societal norm: that those of us who operate businesses that serve the public, by this very act, relinquish our rights to be treated with civility. It’s as if someone revised the Golden Rule to exempt anyone accepting money for goods or services.
Maybe Yelp can start an online support group for us.
Monday, March 24, 2008
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, January 14, 2008
Gift Horse Redux: The Three Year Rule!
This just in. Or rather, my controller Roxanne was just in, and placed a copy of a San Jose Mercury News Article about gift cards on my desk. Highlighted in pink was an interesting paragraph, which had caught her eagle eye: "A National Retail Federation spokesman...emphasized that unused cards without expiration dates--and by law in California that includes all store-branded cards--still can be redeemed after a retailer records them as income." (Emphasis mine.)
Records them as income? Hmmm.
This led Roxanne to the State of California's website where she found Legal Guide S-11, "FAQs and Tips on Gift Certificates and Gift Cards." (While this guide does not include the update that took effect Jan. 1, 2008, enabling consumers holding gift cards with a value of $10 or less to receive cash from retailers instead of using them for a purchase, I think it's probably safe to assume it's up to date in other respects.)
There it was!
Question 7:
Q: "Does an unredeemed gift certificate escheat to the state?" (Oh, it's a verb all right. Imagine the television show: Escheaters!)
A: "Not if it does not contain an expiration date." (Folks who write laws enjoy double negatives; they sound scarier.) "Specified tangible and intangible personal property that is held or owing in the ordinary course of business and remains unclaimed by the owner for more than three years escheats (reverts) to the state. The escheat laws do not apply to gift certificates subject to the rules discussed above." (Emphasis mine.)
So hush my mouth. As a California gift card seller, I get to enjoy Big Sur, the Golden Gate Bridge, redwood trees, and the right to book unused gift cards over the age of three as revenue, even as I wave a fond farewell from my balance sheet?
Of course we must still honor these cards--that's part of the deal here in the Golden State, where gift cards never really expire. Even after they die.
Records them as income? Hmmm.
This led Roxanne to the State of California's website where she found Legal Guide S-11, "FAQs and Tips on Gift Certificates and Gift Cards." (While this guide does not include the update that took effect Jan. 1, 2008, enabling consumers holding gift cards with a value of $10 or less to receive cash from retailers instead of using them for a purchase, I think it's probably safe to assume it's up to date in other respects.)
There it was!
Question 7:
Q: "Does an unredeemed gift certificate escheat to the state?" (Oh, it's a verb all right. Imagine the television show: Escheaters!)
A: "Not if it does not contain an expiration date." (Folks who write laws enjoy double negatives; they sound scarier.) "Specified tangible and intangible personal property that is held or owing in the ordinary course of business and remains unclaimed by the owner for more than three years escheats (reverts) to the state. The escheat laws do not apply to gift certificates subject to the rules discussed above." (Emphasis mine.)
So hush my mouth. As a California gift card seller, I get to enjoy Big Sur, the Golden Gate Bridge, redwood trees, and the right to book unused gift cards over the age of three as revenue, even as I wave a fond farewell from my balance sheet?
Of course we must still honor these cards--that's part of the deal here in the Golden State, where gift cards never really expire. Even after they die.
Tuesday, January 1, 2008
Son of Gift Horse
Another holiday season has come and gone, and as the dust settles, spas everywhere are toting up their gift card and gift certificate sales. I hope you had a tremendous season. My last posting elicited several requests for additional information about the particulars of gift card expiration. To top it off, I read a disturbing article that may portend the future of gift marketing for retailers in states with Escheat Law.
My last posting discussed the double edged sword that is the gift business. We are aware that about 20% of the gift cards we sell will not be redeemed. Instead, they will be thrown away with the gift wrap, tossed into drawers, or uncomfortably avoided by Cousin Midge, who would never dream of taking off her shoes, let alone her clothes, for a spa treatment. What’s not to love about that? Well, in states where you can expire Midge’s gift card, there is much to love.
In California, we lost our ability to expire gift certificates and cards in 1997. Like earthquakes and wildfires, the Undead Gift Card is just the price we pay to live in this beautiful state. And to rub it in a little more deeply, the state of California enables third-party gift sellers, such as a shopping mall that sells gift cards redeemable at its retailers, or gift marketing companies such as Spa Finder or Spa Wish, to expire their gift cards.
At moments like these, I close my eyes and picture Big Sur, or the Golden Gate Bridge on a sunny day.
Hawaii and Maine are also among the states that do not permit expiration of gift cards. (They too boast incredible scenery. Is this more than a coincidence?)
Other states have enacted laws that dictate expiration periods. Kansas and Arkansas, for example, require that gift cards remain valid for five years, which is a nice, sensible period of time that would even give Cousin Midge a chance to stumble across her long-lost gift card.
So, let’s get into this topic in a little more detail. As I alluded to last time, Escheat Law treats unused gift cards and certificates as “abandoned property” after a period of “dormancy.” And guess what happens to this woebegone abandoned property? It can be claimed by the state. How long a dormancy period must pass before Cousin Midge’s long-lost gift card is pronounced dead? It depends on your state, but usually ranges from 3 to 10 years.
(For a quick update on gift card/certificate law, state by state, visit the Consumer’s Union Website:
http://www.consumersunion.org/pub/core_financial_services/003889.html)
Abandoned property laws were originally designed to enable states to help themselves to abandoned bank accounts or unclaimed stock dividends. Perhaps recognizing that gift cards and certificates are a horse of a different color, Arizona and North Carolina are two states which have excluded gift cards and gift certificates from the abandoned property laws.
As I mentioned last time, the phenomenon of escheat-law states going after spa gift card sellers’ “abandoned property” is virtually unheard of. I say virtually, and I personally have never heard of an instance affecting a spa. But I have a feeling that will change soon. Starting in…Maine.
Why? Let’s put it this way: when was the last time you heard a state official complaining about having too much money in the government coffers? Maine has decided that it will shortly begin enforcing its existing abandoned property law to collect money from gift card selling retailers. There’s a slight twist: Maine is only going to take 60% of the value of these dormant/abandoned gift cards from those lucky companies.
One hopes that the big retailers will close ranks and lobby the heck out of other states entertaining the same idea. The laws making this possible are in place in plenty of states, but enforcement has been minimal. So what has changed? It’s a bit of a perfect storm: gift cards, which replaced cumbersome paper gift certificates with instantly updated electronic databases, are easier to track. The ease and appeal of gift cards has grown gift sales exponentially. Much of the hand-wringing about lower retail sales we’ve heard from the media during the past several holiday seasons fails to take into account the impact of gift card sales, which can’t be counted until those magic cards are converted into purchases.
Gift cards are ridiculously convenient and appeal to the time-impoverished or just-plain-unimaginative among us. Their small size makes them easy to merchandise year-round, where they appear at the point-of-sale in nearly every major retailer. Gift cards’ small size, which makes them easy to slip into a wallet, also makes them easy to lose—and that means more “abandoned” funds to tap.
Just how abandoned are these abandoned funds, anyhow? Whenever we make a sale—gift card, service or product--there are hard and soft costs associated with it. We spent a lot of money this holiday season to inspire customers to buy gift cards, from the big Client Appreciation Event that cost over $10,000, to the additional staff that we brought in to handle the additional volume during the hectic week before Christmas. Year round, we maintain gift card records in our databases, for both gifters and giftees. And we pay the people that do this reporting and accounting; we also rent, and heat, and light the office space in which these folks work.
And, oh yes, we’ve paid taxes on the money already. The IRS and the State of California considers it taxable revenue if we “have use of” the money, even though Generally Accepted Accounting Principles (GAAP) don’t let us recognize the sale on our income statement until the gift card is redeemed for a service or product. (If this confuses the heck out of you, you’re not alone. Come to our Spa Director’s Management Intensive and we’ll get you fluent in gift card program management.)
In the state of Maine, the Powers that Be must’ve heard this sort of argument and concluded that businesses can hang onto 40% of the face value of their abandoned gift cards to cover such overhead expenses. When they come to get our abandoned funds in California, I suspect they will be a bit less generous. (I can hear Arnold exulting now about the wonderful new revenue source that did not require increasing taxes.)
What’s a spa to do? Well, it’s probably time to recognize that the gift card party may soon be over in the abandoned-property states, and to start placing half your gift revenues in reserve if cash flow permits. It will take a long time to adjust—if you’re not doing this now, you really can’t go cold turkey on gift cash and still fund your current gift redemptions.
But there is something you can do in the meantime: write your state representatives and squawk. It’s so easy now, via e mail, that there’s no excuse for not chewing on your Congressman’s ear regularly. Your state has a Chamber of Commerce. Stamp your feet and yell to them too. Running a small business here is about to get harder. In California, the most business-unfriendly state in the nation, that’s nothing new.
I think it’s time to go look at some redwoods.
My last posting discussed the double edged sword that is the gift business. We are aware that about 20% of the gift cards we sell will not be redeemed. Instead, they will be thrown away with the gift wrap, tossed into drawers, or uncomfortably avoided by Cousin Midge, who would never dream of taking off her shoes, let alone her clothes, for a spa treatment. What’s not to love about that? Well, in states where you can expire Midge’s gift card, there is much to love.
In California, we lost our ability to expire gift certificates and cards in 1997. Like earthquakes and wildfires, the Undead Gift Card is just the price we pay to live in this beautiful state. And to rub it in a little more deeply, the state of California enables third-party gift sellers, such as a shopping mall that sells gift cards redeemable at its retailers, or gift marketing companies such as Spa Finder or Spa Wish, to expire their gift cards.
At moments like these, I close my eyes and picture Big Sur, or the Golden Gate Bridge on a sunny day.
Hawaii and Maine are also among the states that do not permit expiration of gift cards. (They too boast incredible scenery. Is this more than a coincidence?)
Other states have enacted laws that dictate expiration periods. Kansas and Arkansas, for example, require that gift cards remain valid for five years, which is a nice, sensible period of time that would even give Cousin Midge a chance to stumble across her long-lost gift card.
So, let’s get into this topic in a little more detail. As I alluded to last time, Escheat Law treats unused gift cards and certificates as “abandoned property” after a period of “dormancy.” And guess what happens to this woebegone abandoned property? It can be claimed by the state. How long a dormancy period must pass before Cousin Midge’s long-lost gift card is pronounced dead? It depends on your state, but usually ranges from 3 to 10 years.
(For a quick update on gift card/certificate law, state by state, visit the Consumer’s Union Website:
http://www.consumersunion.org/pub/core_financial_services/003889.html)
Abandoned property laws were originally designed to enable states to help themselves to abandoned bank accounts or unclaimed stock dividends. Perhaps recognizing that gift cards and certificates are a horse of a different color, Arizona and North Carolina are two states which have excluded gift cards and gift certificates from the abandoned property laws.
As I mentioned last time, the phenomenon of escheat-law states going after spa gift card sellers’ “abandoned property” is virtually unheard of. I say virtually, and I personally have never heard of an instance affecting a spa. But I have a feeling that will change soon. Starting in…Maine.
Why? Let’s put it this way: when was the last time you heard a state official complaining about having too much money in the government coffers? Maine has decided that it will shortly begin enforcing its existing abandoned property law to collect money from gift card selling retailers. There’s a slight twist: Maine is only going to take 60% of the value of these dormant/abandoned gift cards from those lucky companies.
One hopes that the big retailers will close ranks and lobby the heck out of other states entertaining the same idea. The laws making this possible are in place in plenty of states, but enforcement has been minimal. So what has changed? It’s a bit of a perfect storm: gift cards, which replaced cumbersome paper gift certificates with instantly updated electronic databases, are easier to track. The ease and appeal of gift cards has grown gift sales exponentially. Much of the hand-wringing about lower retail sales we’ve heard from the media during the past several holiday seasons fails to take into account the impact of gift card sales, which can’t be counted until those magic cards are converted into purchases.
Gift cards are ridiculously convenient and appeal to the time-impoverished or just-plain-unimaginative among us. Their small size makes them easy to merchandise year-round, where they appear at the point-of-sale in nearly every major retailer. Gift cards’ small size, which makes them easy to slip into a wallet, also makes them easy to lose—and that means more “abandoned” funds to tap.
Just how abandoned are these abandoned funds, anyhow? Whenever we make a sale—gift card, service or product--there are hard and soft costs associated with it. We spent a lot of money this holiday season to inspire customers to buy gift cards, from the big Client Appreciation Event that cost over $10,000, to the additional staff that we brought in to handle the additional volume during the hectic week before Christmas. Year round, we maintain gift card records in our databases, for both gifters and giftees. And we pay the people that do this reporting and accounting; we also rent, and heat, and light the office space in which these folks work.
And, oh yes, we’ve paid taxes on the money already. The IRS and the State of California considers it taxable revenue if we “have use of” the money, even though Generally Accepted Accounting Principles (GAAP) don’t let us recognize the sale on our income statement until the gift card is redeemed for a service or product. (If this confuses the heck out of you, you’re not alone. Come to our Spa Director’s Management Intensive and we’ll get you fluent in gift card program management.)
In the state of Maine, the Powers that Be must’ve heard this sort of argument and concluded that businesses can hang onto 40% of the face value of their abandoned gift cards to cover such overhead expenses. When they come to get our abandoned funds in California, I suspect they will be a bit less generous. (I can hear Arnold exulting now about the wonderful new revenue source that did not require increasing taxes.)
What’s a spa to do? Well, it’s probably time to recognize that the gift card party may soon be over in the abandoned-property states, and to start placing half your gift revenues in reserve if cash flow permits. It will take a long time to adjust—if you’re not doing this now, you really can’t go cold turkey on gift cash and still fund your current gift redemptions.
But there is something you can do in the meantime: write your state representatives and squawk. It’s so easy now, via e mail, that there’s no excuse for not chewing on your Congressman’s ear regularly. Your state has a Chamber of Commerce. Stamp your feet and yell to them too. Running a small business here is about to get harder. In California, the most business-unfriendly state in the nation, that’s nothing new.
I think it’s time to go look at some redwoods.
Thursday, November 8, 2007
The Gift Horse
We've all heard the expression: don't look a gift horse in the mouth. I confess, I looked, didn't like what I saw, and put the gift certificate horse out to pasture for a number of years. But the old girl still has some life in her, it turns out. A lot of life.
Those of you who never had a second thought about gift marketing can probably go get a Starbucks and touch up your manicures. For the rest of you who have had dark nights of the soul wondering if you were undermining your core business by flogging the gift horse--read on.
When I lead spa seminars, there is always a bit of bewilderment when I discuss my conflicted relationship with gift marketing. (Whenever you find someone wringing their hands and muttering over the merit of gift sales, whisper the words "escheat law" and watch them jump. Go on. It's fun.) Here's the problem. In many states, gift certificates cannot be expired. I've yet to meet a spa that keeps its hands out of the unredeemed gift cash cookie jar. You know you want it. We all do. We know that a substantial portion of these gift cards and certificates will never be redeemed.
If all we had to worry about was whether we had the ability to honor these certificates or not, it would be lovely. But unfortunately, we have a balance sheet that keeps us honest about our appetite for gift cash. And many spas in states where gift cards can't be expired face a creeping liability that doesn't go away. That liability may not seem "real," to you--the villagers with the gift certificates, pitchforks and torches won't march on your spa some night, demanding massages and pedicures. However, this paper liability can eat away at the living heart of your company, your owner equity. Buy your CPA a nice lunch next week and learn why this is not a Good Thing.
But let's put this particular gift marketing issue aside for a moment. My sentiment about gift sales made an about face last year after we conducted a customer survey that indicated one third of our top 350 clients had made their first visit to Preston Wynne with a gift certificate. Perhaps this comes as a "duh" to you. It did not, to me. That's because, back in the late 90's, when our spa was a mecca for the Queen for a Day Spa Pamper Package Gift Recipient, we learned that rampant gift sales had pushed down profit, pushed up employee turnover, and nuked our retail sales ratio. The typical spa gift recipient did not reschedule, did not begin a home care regimen, and (wince) often didn't leave a gratuity.
But times have changed. Many more Americans are now spa-goers, and spa gift certificates these days seldom go to Spa Virgins. They're being given to experienced, educated, and can-you-say-Qualified spa goers. Yes--the men and women that we love. Gift certificates, in short, can be the beginning of a beautiful relationship.
If you've noticed that the lines of dutiful gift buying men seem shorter each holiday season, you've hopefully marked an increase in online gift sales.
Please tell me that you can sell gifts online. This is as essential as breathing in today's spa industry. A gift shopper who cannot complete a secure gift card purchase transaction on your website will quickly move on to a spa that can fulfill. None of that "submit this request form" business. So last century.
After a long period of flat sales, gift activity at our spa began to grow again last year thanks to our new "print your own" gift certificate capability. Adding to the excitement: these were almost entirely brand spanking new customers, who found us through a web search.
Please, please tell me that your website is search engine optimized. If not, you're missing out on a lot of gift sales. You're missing out on a lot of sales, period.
(I'll throw in a plug for our web developer Accelerator Enterprise Technologies here; go find them at www.acceleratoret.com.)
Kick off your selling season with a special event that encourages your regular guests to pick up spa gift certificates before the 12-days-of-Christmas wave hits. Offer an incentive--we'll be giving away a gift certificate for a spa pedicure with every $150 in gift cards a guest purchases. Because these giveaway gift certificates are promotional, they can be expired. We expire them in 90 days, offering plenty of time for the guest to use them. Do these sales cut into our regular gift volume? We don't think so--most of those late-season buyers are guys buying for wives and sweethearts, and most of the people that take advantage of the pre-season promotion are spa regulars, about 90% of whom are female.
There's more than one way to make a gift horse gallop. See you at the races!
Those of you who never had a second thought about gift marketing can probably go get a Starbucks and touch up your manicures. For the rest of you who have had dark nights of the soul wondering if you were undermining your core business by flogging the gift horse--read on.
When I lead spa seminars, there is always a bit of bewilderment when I discuss my conflicted relationship with gift marketing. (Whenever you find someone wringing their hands and muttering over the merit of gift sales, whisper the words "escheat law" and watch them jump. Go on. It's fun.) Here's the problem. In many states, gift certificates cannot be expired. I've yet to meet a spa that keeps its hands out of the unredeemed gift cash cookie jar. You know you want it. We all do. We know that a substantial portion of these gift cards and certificates will never be redeemed.
If all we had to worry about was whether we had the ability to honor these certificates or not, it would be lovely. But unfortunately, we have a balance sheet that keeps us honest about our appetite for gift cash. And many spas in states where gift cards can't be expired face a creeping liability that doesn't go away. That liability may not seem "real," to you--the villagers with the gift certificates, pitchforks and torches won't march on your spa some night, demanding massages and pedicures. However, this paper liability can eat away at the living heart of your company, your owner equity. Buy your CPA a nice lunch next week and learn why this is not a Good Thing.
But let's put this particular gift marketing issue aside for a moment. My sentiment about gift sales made an about face last year after we conducted a customer survey that indicated one third of our top 350 clients had made their first visit to Preston Wynne with a gift certificate. Perhaps this comes as a "duh" to you. It did not, to me. That's because, back in the late 90's, when our spa was a mecca for the Queen for a Day Spa Pamper Package Gift Recipient, we learned that rampant gift sales had pushed down profit, pushed up employee turnover, and nuked our retail sales ratio. The typical spa gift recipient did not reschedule, did not begin a home care regimen, and (wince) often didn't leave a gratuity.
But times have changed. Many more Americans are now spa-goers, and spa gift certificates these days seldom go to Spa Virgins. They're being given to experienced, educated, and can-you-say-Qualified spa goers. Yes--the men and women that we love. Gift certificates, in short, can be the beginning of a beautiful relationship.
If you've noticed that the lines of dutiful gift buying men seem shorter each holiday season, you've hopefully marked an increase in online gift sales.
Please tell me that you can sell gifts online. This is as essential as breathing in today's spa industry. A gift shopper who cannot complete a secure gift card purchase transaction on your website will quickly move on to a spa that can fulfill. None of that "submit this request form" business. So last century.
After a long period of flat sales, gift activity at our spa began to grow again last year thanks to our new "print your own" gift certificate capability. Adding to the excitement: these were almost entirely brand spanking new customers, who found us through a web search.
Please, please tell me that your website is search engine optimized. If not, you're missing out on a lot of gift sales. You're missing out on a lot of sales, period.
(I'll throw in a plug for our web developer Accelerator Enterprise Technologies here; go find them at www.acceleratoret.com.)
Kick off your selling season with a special event that encourages your regular guests to pick up spa gift certificates before the 12-days-of-Christmas wave hits. Offer an incentive--we'll be giving away a gift certificate for a spa pedicure with every $150 in gift cards a guest purchases. Because these giveaway gift certificates are promotional, they can be expired. We expire them in 90 days, offering plenty of time for the guest to use them. Do these sales cut into our regular gift volume? We don't think so--most of those late-season buyers are guys buying for wives and sweethearts, and most of the people that take advantage of the pre-season promotion are spa regulars, about 90% of whom are female.
There's more than one way to make a gift horse gallop. See you at the races!
Monday, September 10, 2007
Saturation Nation: The Spa Market Matures
Does anybody do market research any more?
I hate to be a party pooper--especially with a consulting business that serves appetizers to the party goers. (Spa Startup Workshop, anyone? Take two, they're small.)
But really, people!
Market research is not asking your friends if they'd like for you to open a spa.
Market research is not visiting every resort spa in the hemisphere and deciding that the local market is sorely lacking in 400 square foot treatment rooms with ensuite Swiss showers, heated floors, saltwater aquariums, fireplaces and butler service.
The high end of the spa market is saturated. Yes, there are pockets of opportunity here and there. But saturation is a hard reality. The high net worth individual has an abundance of choices when considering where to spend their spa dollars. And increasingly, they're spreading the love around.
The problem with would-be spa owners is that, all too often, they're hard core spa goers. I know, that sounds like a Good Thing. We wouldn't want to buy wine from a winemaker who wasn't a wine drinker. We wouldn't want to eat an elegant dinner at a restaurant run by someone who only eats fast food.
But the spa goer-turned-spa entrepreneur--sort of like restauranteurs and winemakers--are often inspired by a deeply personal vision. That vision sometimes borders on obsession. These are the clients that start the conversation with the spa consultant by discussing in breathless detail the water feature they're planning for the entryway. (They've even got the Malaysian stone mason they've imported to do the work living in their guest room for three months while it's been constructed.)
If you're extremely lucky, your personal vision will prove compelling to lots of potential customers. If you're not so lucky, you'll blow a couple of million dollars on a spa that you simply can't afford to operate. And because you're such a spa geek, it will be impossible for you to believe that your marketplace just isn't ready for the Organic Tibetan Yak Milk baths, and worse still, doesn't even appreciate the heated, tumbled marble mosaic tile floors. The Philistines!
I know this sounds silly. But the people getting caught in this "if we build it, they will come" trap are not lacking in brains or even business education. There are plenty of MBAs freaking out over their spa's P & L tonight.
So if market saturation is nigh, why aren't more spas going out of business? Surely
we should be witnessing a shakeout. That's what happens in an industry that's saturated.
As usual, the answer is that spas are Special. Because they inspire irrational passion, there is usually someone waiting in the wings to catch a swooning spa. That entrepreneur may be paying pennies on the dollar for the facility, or may simply be walking into a lease--sometimes on a fully equipped spa. So their odds of success are better than the original operator's.
If you're considering the best way to enter the spa market, look for a customer group or market that's not being served. (Note that I say "customer group." You're not a group. It's likely that you are even an anomaly.)
One of my consulting clients literally searched the entire United States for the community with the perfect demographics and psychographics for her startup spa. When she found it, she moved there and opened a spa. She is successful because she listened to the market and she built her venture--and her life--around the needs of her customers. Her motto could easily be, "If we build it, it's because they're already here."
One area of the spa industry in which opportunity still looms large is spa management. Relative to the number of spas out there, there are very few spa managers. Experienced managers are being wooed by everyone from big hospitality organizations to day spas.
This is also a great place to start for an aspiring spa owner. If your principal experience with spa operations is being a spa client, you owe it to yourself to get a reality check. Go behind the curtain and see what's really happening while you're dozing under your Blueberry Antioxidant mask.
Spas always need smart, motivated people to man their front desks. Be frank about your ultimate aspirations; not everyone wants to play Spa University for you. But I know the best way to prevent another new competitor from entering my market is to give them a front row seat to the phenomenon of Spa Saturation!
I hate to be a party pooper--especially with a consulting business that serves appetizers to the party goers. (Spa Startup Workshop, anyone? Take two, they're small.)
But really, people!
Market research is not asking your friends if they'd like for you to open a spa.
Market research is not visiting every resort spa in the hemisphere and deciding that the local market is sorely lacking in 400 square foot treatment rooms with ensuite Swiss showers, heated floors, saltwater aquariums, fireplaces and butler service.
The high end of the spa market is saturated. Yes, there are pockets of opportunity here and there. But saturation is a hard reality. The high net worth individual has an abundance of choices when considering where to spend their spa dollars. And increasingly, they're spreading the love around.
The problem with would-be spa owners is that, all too often, they're hard core spa goers. I know, that sounds like a Good Thing. We wouldn't want to buy wine from a winemaker who wasn't a wine drinker. We wouldn't want to eat an elegant dinner at a restaurant run by someone who only eats fast food.
But the spa goer-turned-spa entrepreneur--sort of like restauranteurs and winemakers--are often inspired by a deeply personal vision. That vision sometimes borders on obsession. These are the clients that start the conversation with the spa consultant by discussing in breathless detail the water feature they're planning for the entryway. (They've even got the Malaysian stone mason they've imported to do the work living in their guest room for three months while it's been constructed.)
If you're extremely lucky, your personal vision will prove compelling to lots of potential customers. If you're not so lucky, you'll blow a couple of million dollars on a spa that you simply can't afford to operate. And because you're such a spa geek, it will be impossible for you to believe that your marketplace just isn't ready for the Organic Tibetan Yak Milk baths, and worse still, doesn't even appreciate the heated, tumbled marble mosaic tile floors. The Philistines!
I know this sounds silly. But the people getting caught in this "if we build it, they will come" trap are not lacking in brains or even business education. There are plenty of MBAs freaking out over their spa's P & L tonight.
So if market saturation is nigh, why aren't more spas going out of business? Surely
we should be witnessing a shakeout. That's what happens in an industry that's saturated.
As usual, the answer is that spas are Special. Because they inspire irrational passion, there is usually someone waiting in the wings to catch a swooning spa. That entrepreneur may be paying pennies on the dollar for the facility, or may simply be walking into a lease--sometimes on a fully equipped spa. So their odds of success are better than the original operator's.
If you're considering the best way to enter the spa market, look for a customer group or market that's not being served. (Note that I say "customer group." You're not a group. It's likely that you are even an anomaly.)
One of my consulting clients literally searched the entire United States for the community with the perfect demographics and psychographics for her startup spa. When she found it, she moved there and opened a spa. She is successful because she listened to the market and she built her venture--and her life--around the needs of her customers. Her motto could easily be, "If we build it, it's because they're already here."
One area of the spa industry in which opportunity still looms large is spa management. Relative to the number of spas out there, there are very few spa managers. Experienced managers are being wooed by everyone from big hospitality organizations to day spas.
This is also a great place to start for an aspiring spa owner. If your principal experience with spa operations is being a spa client, you owe it to yourself to get a reality check. Go behind the curtain and see what's really happening while you're dozing under your Blueberry Antioxidant mask.
Spas always need smart, motivated people to man their front desks. Be frank about your ultimate aspirations; not everyone wants to play Spa University for you. But I know the best way to prevent another new competitor from entering my market is to give them a front row seat to the phenomenon of Spa Saturation!
Tuesday, September 4, 2007
The High Cost of Free Time
In this month’s Wynne Business newsletter, I discussed the impact of paid time off on your revenue production budget. I mentioned the rather shocking discovery that our employees work just 80% of their scheduled hours, through a combination of paid time off and additional unpaid time off. Spa therapists and practitioners enjoy having a flexible schedule that enables them to travel, take classes, or leave the spa “if there’s nothing going on.” For many employees, unpaid time off is an additional benefit of working in the spa setting.
Unpaid time off is often looked at as an entitlement: “I’m not here; you don’t have to pay me, and someone will work this shift—so why can’t I go to Maui for my yoga retreat?”
Many spas have policies dictating how much unpaid time off is allowed. In the “real world” this is standard boilerplate HR/employee manual stuff. In Spa World, it’s the exception. (Employee manual? Please visit the “tools and products” section of our website and we’ll help you make one of your very own!)
At Preston Wynne Spas, unpaid time off is meticulously tracked through the time clock in our Millenium software. All employees have a “bank” of unpaid time off they’re allowed to take within a year. They can put time back into their bank if they cover a shift for another employee.
One hair raising point about the importance of tracking hours worked. If you offer medical benefits, you need a way to demonstrate that covered employees are indeed working the minimum qualifying hours. “Close enough” isn’t. In spas where service providers are paid by the appointment (commission or fee-for-service) managers often allow employees to cut a shift short if they’re not scheduled with a client.
If there is a major medical insurance claim by an employee, the first thing your insurance company will do is audit their timesheets. If the employee has not actually worked the qualifying hours, even if they’re a just a few hours shy, you’ll be stuck with the entire bill for their care. Imagine what would happen to your company if an employee had a catastrophic illness or injury, and you were left holding the bag!
In many spas, extra unpaid time off is permitted for employees who can get their assigned schedule covered by another service provider. In our own spa, a wall in our employee prep area is usually covered with “coverage request” forms, in which service providers solicit co-workers to take over a shift for them. Though these coverage requests must be approved by their supervisor, the standard operating procedure has been to allow employees to take as much time as they’re able to cover.
What’s wrong with this picture? Well, imagine a popular esthetician, Busy Esty, getting “coverage” from her co-worker, Newbie, who as yet has few requests. Busy Esty’s regular request clients aren’t going to accept an appointment with the newcomer. Nor does Busy Esty want to give up her regular clients. So a shift that would have been 100% sold out is now 25% utilized. And worse yet, those regular guests who would have made 10 visits to the spa this year are going to make one less. They’d rather just “wait” for Busy Esty.
Here’s another scenario. The esthetician who is “covering” for Busy Esty is popular too, but she’s coming in on a day she doesn’t usually work. Her clients are accustomed to seeing her on certain days of the week, and at certain times. Even though she is offering them an opportunity to come in and see her, they’re less likely to move to a different day and time than their normal slot. So once again, the shift is undersold when it should be full. It is crucial that anyone “covering” a shift has the ability to generate the revenue for that particular shift.
If your spa is to reach its revenue budget, two things have to happen. As mentioned in our newsletter, you have to set accurate goals for sales production. (We call these Contributions, since “quota” is a dirty word to Spa Folk.) We know that we have to gross the number up to account for the fact that our workers will only complete a portion of their assigned schedule. Depending on how lax or strict you are about unpaid time off, this number can range from 10-30%.
As I mentioned, our employees have been working, on average, 80% of their scheduled time. Imagine, only having 80% of your workforce on hand, but setting their sales contribution as though they were on hand for 100% of their shifts. When you’re in the hands-on Personal Services business, it’s not going to happen. You’re going to miss your goals.
A tremendous challenge for quality spa operators is the shortage of qualified employees. No spa I know has a vast talent pool of massage therapists, estheticians and nail care experts at the ready whenever they need a hand. Instead, well trained staff members are often feeling that they’re stretched a bit thin, and working more shifts than they prefer.
So how can you manage unpaid time off in a way that works for your team and your bottom line? Here are some basic ground rules.
1. Set a limit on unpaid time off. You can’t afford not to. Make sure the amount of time is reasonable for both your company and your team. In our spa, the unpaid time off benefits are as follows:
- After 12 months, 5 unpaid days may be taken per year
- Years 2-5: 10 unpaid days may be taken per year
- Years 6-10: 15 unpaid days may be taken per year
This is based on a full time schedule. Part time employees receive fewer unpaid days off per year—remember, they’re working fewer days to begin with!
Remember that this time is in addition to vacation, sick and holiday pay.
2. Increase the benefit with seniority, but within reason. Those employees should have lots of regular requests.
3. It’s perfectly reasonable to ask that if an employee can’t commit to fulfilling their schedule within the parameters of your time off policies, then they should not obligate themselves to so many days to begin with. By committing to fewer scheduled days and picking up additional shifts to cover co-worker’s days off, they could end up with a similar outcome in terms of the number of total days worked, and the spa can have a more predictable way of generating revenue.
4. Enable employees to “bank” unpaid time off and build up their reserve by covering shifts for co-workers. This puts some control back in their hands.
5. Communicate to employees when they are running low on unpaid time off. Help them strategize about how to use their unpaid time off. If they’re used to an endless supply of unpaid time off, having new limits can be a rude awakening.
6. Say “no” when you have to. An employee who continuously consumes all their time off and still expects more is not committed to the same goals you are. You may think they’re invaluable, but upon closer examination, you may find that their contribution to your success is minimal.
Unpaid time off is a great benefit for workers in our industry. Just make sure that you receive enough bang for your buck—just because you don’t write a check doesn’t mean you’re not paying for it!
Unpaid time off is often looked at as an entitlement: “I’m not here; you don’t have to pay me, and someone will work this shift—so why can’t I go to Maui for my yoga retreat?”
Many spas have policies dictating how much unpaid time off is allowed. In the “real world” this is standard boilerplate HR/employee manual stuff. In Spa World, it’s the exception. (Employee manual? Please visit the “tools and products” section of our website and we’ll help you make one of your very own!)
At Preston Wynne Spas, unpaid time off is meticulously tracked through the time clock in our Millenium software. All employees have a “bank” of unpaid time off they’re allowed to take within a year. They can put time back into their bank if they cover a shift for another employee.
One hair raising point about the importance of tracking hours worked. If you offer medical benefits, you need a way to demonstrate that covered employees are indeed working the minimum qualifying hours. “Close enough” isn’t. In spas where service providers are paid by the appointment (commission or fee-for-service) managers often allow employees to cut a shift short if they’re not scheduled with a client.
If there is a major medical insurance claim by an employee, the first thing your insurance company will do is audit their timesheets. If the employee has not actually worked the qualifying hours, even if they’re a just a few hours shy, you’ll be stuck with the entire bill for their care. Imagine what would happen to your company if an employee had a catastrophic illness or injury, and you were left holding the bag!
In many spas, extra unpaid time off is permitted for employees who can get their assigned schedule covered by another service provider. In our own spa, a wall in our employee prep area is usually covered with “coverage request” forms, in which service providers solicit co-workers to take over a shift for them. Though these coverage requests must be approved by their supervisor, the standard operating procedure has been to allow employees to take as much time as they’re able to cover.
What’s wrong with this picture? Well, imagine a popular esthetician, Busy Esty, getting “coverage” from her co-worker, Newbie, who as yet has few requests. Busy Esty’s regular request clients aren’t going to accept an appointment with the newcomer. Nor does Busy Esty want to give up her regular clients. So a shift that would have been 100% sold out is now 25% utilized. And worse yet, those regular guests who would have made 10 visits to the spa this year are going to make one less. They’d rather just “wait” for Busy Esty.
Here’s another scenario. The esthetician who is “covering” for Busy Esty is popular too, but she’s coming in on a day she doesn’t usually work. Her clients are accustomed to seeing her on certain days of the week, and at certain times. Even though she is offering them an opportunity to come in and see her, they’re less likely to move to a different day and time than their normal slot. So once again, the shift is undersold when it should be full. It is crucial that anyone “covering” a shift has the ability to generate the revenue for that particular shift.
If your spa is to reach its revenue budget, two things have to happen. As mentioned in our newsletter, you have to set accurate goals for sales production. (We call these Contributions, since “quota” is a dirty word to Spa Folk.) We know that we have to gross the number up to account for the fact that our workers will only complete a portion of their assigned schedule. Depending on how lax or strict you are about unpaid time off, this number can range from 10-30%.
As I mentioned, our employees have been working, on average, 80% of their scheduled time. Imagine, only having 80% of your workforce on hand, but setting their sales contribution as though they were on hand for 100% of their shifts. When you’re in the hands-on Personal Services business, it’s not going to happen. You’re going to miss your goals.
A tremendous challenge for quality spa operators is the shortage of qualified employees. No spa I know has a vast talent pool of massage therapists, estheticians and nail care experts at the ready whenever they need a hand. Instead, well trained staff members are often feeling that they’re stretched a bit thin, and working more shifts than they prefer.
So how can you manage unpaid time off in a way that works for your team and your bottom line? Here are some basic ground rules.
1. Set a limit on unpaid time off. You can’t afford not to. Make sure the amount of time is reasonable for both your company and your team. In our spa, the unpaid time off benefits are as follows:
- After 12 months, 5 unpaid days may be taken per year
- Years 2-5: 10 unpaid days may be taken per year
- Years 6-10: 15 unpaid days may be taken per year
This is based on a full time schedule. Part time employees receive fewer unpaid days off per year—remember, they’re working fewer days to begin with!
Remember that this time is in addition to vacation, sick and holiday pay.
2. Increase the benefit with seniority, but within reason. Those employees should have lots of regular requests.
3. It’s perfectly reasonable to ask that if an employee can’t commit to fulfilling their schedule within the parameters of your time off policies, then they should not obligate themselves to so many days to begin with. By committing to fewer scheduled days and picking up additional shifts to cover co-worker’s days off, they could end up with a similar outcome in terms of the number of total days worked, and the spa can have a more predictable way of generating revenue.
4. Enable employees to “bank” unpaid time off and build up their reserve by covering shifts for co-workers. This puts some control back in their hands.
5. Communicate to employees when they are running low on unpaid time off. Help them strategize about how to use their unpaid time off. If they’re used to an endless supply of unpaid time off, having new limits can be a rude awakening.
6. Say “no” when you have to. An employee who continuously consumes all their time off and still expects more is not committed to the same goals you are. You may think they’re invaluable, but upon closer examination, you may find that their contribution to your success is minimal.
Unpaid time off is a great benefit for workers in our industry. Just make sure that you receive enough bang for your buck—just because you don’t write a check doesn’t mean you’re not paying for it!
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