Posted February 25, 2019
We are excited to share this next post in our series on How to Run a Great Salon Promotion with you, as feedback from our members tells us that this is the area that they struggle with most – profitability. As most salon owners saw during the Groupon days, a poorly planned promotion can be worse than no business at all; and a lot of that comes down to whether or not you are actually making money off your promotion – and it’s an easy trap to fall into.
Profitability is completely dependent on the type of offer that you are creating for your salon promotion. You can read more about how to create a great offer for your salon promotion here. Whether you are running a value-added service or offering a discount sale, each require a different structure to ensure that whatever your offer is, you are still profitable in salon.
An important thing to note in the profitability of a promotion is that you don’t want to be running your promotion to just cover your costs – you should always leave some profit on your services. This ensures that if there are any accidents or mistakes, you are still covered and making money. After all, we are all in business to be making money! If you run your promotions at cost-price you will always run the risk of actually losing money on a promotion through silly mistakes or slightly longer service times that throws your margin balance out of whack. Always leave a little meat on the bone of your promotion to stay afloat!
VALUE ADD SERVICE
We recommend that most salon owners should be considering value-add services as their offer of choice for any salon promotions. This not only ensures that you don’t devalue the service that you provide, but it also encourages customers to work with you in new ways. It is important though to ensure that you aren’t giving away something pricey or time-consuming for free and that you make sure that you still make some profit from the offer. Remember that Value Added Services could include Bundle deals, bulk purchases, buy one get one offers or offering a complimentary service alongside an existing service. To calculate the price you need to offer the service for, you need to work out how much it costs you to deliver both services, factoring in everything – staff time, wage rates, overheads for your salon, products used etc. If your standard profit margin on services at 30%, you can then afford to discount the services by half – to 15%. For instance, if you’re offering a free eyebrow wax with every facial, the eyebrow wax cannot cost you more than $10 to service, on a Facial that costs you $70 to service. Realistically then, the retail price of the offer should be set at $100 with the total value of the service being $120.
If you choose to go down the route of a percentage or dollar value discount, make sure that you keep your discount to a set margin to ensure profitability. For a successful salon promotion, you should be aiming to still make a 15% margin on any service – so this tells you what percentage discount you can take off your product or service, depending on where you have set your margins. It also tells you how long your staff needs to be spending on a client to ensure that you are still making that 15% margin. Often a discounted service will be slightly shorter than normal service, and this is where you make money, in being able to offer more services during the day.
Ensuring that your team understands their time and product requirements for each promotional client is also key to making good money off promotions. If you have worked out your profit margins based on a 45-minute service rather than a 1-hour service, if your staff take the full hour to perform the service, then you have blown out your margins. It’s also important that your staff understand the importance of upselling additional services, retail products or future appointments, as the longevity of a customer is where you will truly see a great profit and best Return on Investment from your promotion. Keep your eye out as next week we will be sharing how to structure your salon processes to ensure your maximum profit in any promotion.
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