How to increase your prices without losing clients
Increasing your prices - It’s something that every business owner needs to do from time to time, but most of us are scared to do, or at the very least, we’re not sure how to do it. When reflecting on your service menu prices it’s natural to have questions run through your mind like Is my work worth the higher price? Will my clients run at the sight of higher prices? Will I be able to recover if they do go somewhere else? So that being said, where does one begin when wanting to increase their prices?
In truth, these self-doubting questions are simply thought, not fact. What many business owners have found is that raising your rates rarely drives clients away, in fact most found it actually retains your ideal and loyal clients and lets go of the bargain shopper. With that in mind, we turned to the industry to find out how they approach price increases and offer you some simple strategies to help you earn more – without losing your clients.
First things first, let's address the current climate by starting with the pandemic and reopening of beauty businesses. With the abundance of increased personal protective equipment (PPE) and cleaning products you'll need to invest in for the health and safety of your team and clients, your cost of consumables per treatment rises. Consumables are items you would use in a treatment such as cotton rounds, fibrella, tint strips and the like, which can only be used and disposed of once during a treatment. Many businesses don't factor into their service menu which when calculated these small additions add to the plummeting your profit margins. Ensure your treatment costing allow for use of consumables but too that your treatment protocols clearly outline how much of what item therapists should be using.
When looking at your financials, Maria Enna Cocciolone, CEO & Founder of INSKIN Cosmedics says 'reopening will come with new costs that need to be factored into your pricing, so make sure you get intimate with your Profit & Loss statement'. Not only should we be reviewing the financial aspect of the treatment, but the popularity too which Maria adds, 'review your menu and ensure you are only offering treatments that are viable and sort after - this is a great time to remove those treatments you have been doing for years but bring you no profit or benefits!'
Speaking of financial metrics, Gry Tomte, Director of HUD Skin + Body suggests business owners 'look at the profitability of each treatment (by adding up all products used in each treatment plus all costs such as wages and other outgoings, divided by 60 minutes) and make sure it’s a profit of at least $2 per minute - and preferably over $5'. When it comes to watching the competition, Gry works on the premise of 'understanding your own outgoings, rather that someone else's. Sometimes the treatments we think are profitable are not so!', which is a good reason why you should never base your prices off the businesses around you for the sake of doing so!
Sometimes it can be as simple as when one looks and feels the part, they charge the part! Daphne Walsh, Environ Brand Manager (VIC & QLD), for Margifox Distributors recommends 'tying a price increase in with a re-fresh to your salon – introducing a new service, consider a new product range or take it a step further and update decor, window displays, staff uniforms etc. Remember a fresh new look puts a spring in everyone’s step and will help attract new clients to your business'.
At the forefront of every business sits a loyal clientele to which Katy Bacon, Sales and Education Manager, Asia Pacific for Murad Australia advises business owners should aim for client satisfaction - 'firstly you need to ensure that your customers are satisfied with the services you provide. With every increase in cost, business needs to focus on proving it's worth and whether the treatments can offer more value for money. Our clients are more likely to accept higher prices if they’re feel they are receiving extra value or service. Think about what you could add in to your treatment that will be of minimal cost to you, but would have higher perceived value to the customer. This could include adding hot stones into your massage, machinery such as LED to enhance your services, though to increased personal protection costs for client safety in this post covid world.'.
"Offering your clients the opportunity to ‘add in’ advanced services to their treatment increases your profitability and margin. Examples could be LED, take home consumables from the service e.g. nail files/top coat, product infusions, experiential masks or additional massage – services that don’t take more time in the treatment room but deliver a greater result for your client." - Katy Bacon Sales and Education Manager, Asia Pacific for Murad Australia
So, when is the right timing for business owners to be increasing their prices? Kristy McKenzie, Founder of SalonPay says she 'always increase prices in November. It is less noticed as Christmas spending has well and truly kicked in, and disgruntled clients are less likely to leave to look for another salon at this time of year. This allows for a bumper December/January.' Further to this, Kristy adds 'I would allow a client to choose a package and become a member of the salon if they commit to an extended time period. 'The price today is $300 (Facial & skin care items), however, we have this package for a 12 month period for just $40 per week. You can come every 6 weeks and have xyz skin care prepaid)".'
Katy agrees adding; 'I always used to say the best time to put your prices up is November, it’s the industries busiest time of year, clients are demanding your services and are happy to accept the increase in their service cost. With salons preparing to open their doors post Covid-19, right now is the perfect time to revise your pricing. The price tag of providing services over the coming months is going to cost business owners more, therefore our customers will expect that for their health and wellbeing, their favorite service may cost that little bit more – arguably a dollar well spent', especially after not having hair removed or faces treated for 8+ weeks!
All this being said, you're left with the ultimate question - should we be announcing a price increase?
Gry Tomte, recalls they've 'never announced a price increase to (their) clients - and we’ve never had anyone question it', while for those who are ademat at notifying clients, Kristy suggests 'popping a short statement by the reception area noting a small price increase - but you don't have to. Around the time of a price increase, I would also have 2-3 value added packages a client can choose from to allow a feeling of 'getting a bargain' - even if these are not discounted'.'
If you're still feeling a little uneasy about the topic of price increase then request to join our private Facebook Community to continue the conversation and take a look at the scripts business owners have provided to their clients during this time or perhaps if money and value are a fear for you then listen to our podcast episode on all things money mindset.