Are You Dying to Discount

Death by Discount

by Pam Stellema

in Business Development

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Today more than ever, many salons owners believe that the only way to grab new clients is to offer heavily discounted deals via coupon promotions.

The erroneous sales pitch given to salon owners is “don’t expect to make any profit, but look at all the new clients you will gain”.

Here are the facts…

Most clients that you attract via a coupon are discount shoppers.  The reason they’re coming to your salon is because they’re looking for a cheap deal, and when that deal is no longer on offer, they’ll move on to the next salon offering a cheap coupon deal.

Not only do these clients salon hop, but they seldom purchase additional services or retail product.  This makes sense because the whole reason they’ve come to your salon in the first place is to spend less money… so why would they pay full price for future services when they can simply get another coupon and move on to someone else?

Coupon reality

Coupons companies often require salon owners to discount their services by up to fifty percent, and then ask for up to 50% of what is left over.  They do this with the promise that it will bring a flood of new clients through your doors, and it often does….but often at a major cost to your business?

If you look at the actual dollars and cents involved in this kind of offer, you’ll most likely be horrified at just how much money these kinds of deals are actually costing you to provide.

Let’s look at an average coupon offer.  When costed out using quite conservative figures, it would probably look something like this:

Normal service price is $120.00

Less

Discount $60

Coupon fee $30

Cost of products $12

Cost of consumables $2

Cost of labour $25

Salon Owners Profit/Loss = $9 Loss

That’s a LOSS of $9 for this kind of offer, with very little chance of up-selling services OR retaining the client.

Before you decide to jump on the coupon bandwagon, take a long hard look at the reality of coupon and discount marketing.

Ask yourself if this is really the kind of client you want to attract to your salon, or whether you would be better off going about gaining new clients in a way that will help you to make money and keep you in business for the long-term.

Not only do you risk losing a great deal of money with coupon marketing, but you also risk losing your loyal clients who have been content to pay full price for your services in the past.

Is it really what you want for your business?

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Pam Stellema

Pam is an industry experienced coach, salon owner, speaker, author and copywriter.She works beside salon and spa owners to show them how to effectively grow their profits and remain in business for the long-term.
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{ 8 comments… read them below or add one }

Traci

Pam, I have been in the industry for 30 years and have owned my salon now for 21. When I first started in this business,my boss had put a coupon in the local paper with my name on it offering a discount with me for “new clients only”. I got a few, retained a few and SLOWLY started to build a clientel. It took YEARS to build but I did it only through hard work and dedication and NOT constantly offering a discount. Referrels are what I grew my business on. Then when I opened up my salon, the new employees wanted to grow their business like I did. I told them “we will put in the local paper an ad that reads: FREE HAIRCUT W/ so and so”. I mean you might as well just give the haircut away for free anyways since these marketers think they are offering us such an awesome deal. Well, my employees DID in fact do some free haircuts, good ones I may add and they did upsell the client into a blowdry. Most of the clients did in fact pay us for the blowdry and came back because our pitch was not the haircut, it was how to blowdry your hair properly…..they loved it and continued to come. We gave them something for free AND taught them something. I only offered this with my new employees every once in awhile and it worked. I have NEVER advertised with a marketing company nor will I ever because guess what? THEY would never give up their commission for me, why should I give up my service to them?

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Pam

Traci, Well said. I have never seen a new doctor offer free consultations or a new dentist offering free fillings so why are hair and beauty providers in the position where they have to offer free services. I believe that this positions them badly in the eyes of the client and they will have difficulty ever being percieved as someone who deserves full fare. Marketing is essential to every business but good marketing allows for long term growth and profitability also.

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Marg Hayes

Well said Pam, I have heard some unbelievable stories lately, and seen some pretty terrible work. No business can afford to do services at rock bottom prices and give quality services. The damage is devastating.

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Pam

Thanks Marg, There are better ways to market any business than to simply discount. YES, the customer loves a discount – no two ways about that one but at the end of the day they also want great service and product also. People are looking for great VALUE not just cheap services.

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Steve

Totally agree Pam, salons are jeopordising their loyal long term customers by offering huges discounts attracting one of bargin hunters.
Well done for alerting salon owners to the downfalls in this discount frenzy that is taking place now within the beauty industry.
Steve

Reply

Pam

Thanks Steve, I believe that there are many more ways to market successfully to salon clients than relying solely on discounting. Too many salons are falling prey to this activity and it is putting many of them out of business. Such a shame.

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Pam

MAVS, You are absolutely correct. Many people jump to the defence of these coupons as an effective form of marketing. However, if your goal is to attract new clients AND make money, then this is not the most effective marketing option.
I think that is a VERY interesting comment you have made about their payment terms. I would be extremely worried if that is what any marketing business said to me.

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MAVS

Thank you sooooo much for finally revealing the truth about this “group on” mindset. I have been saying this for 3 years now. All you had to do was the math to understand that the only people making money here are the companies that sell the deals not those of us providing the services. In case anyone hasn’t noticed these companies only reimburse you in thirds and I quote “in case your business closes.” Now there is support for you.

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