Ask the expert: discounting
Deep discounting can be damaging to the salon and spa market but the truth is we also have low utilisation rates - 33% is the average utilisation rate of a spa, which is shocking. Meanwhile 85% of your costs are fixed so you’re paying for space you don’t use. So if 33% is the average occupancy rate it introduces a big question: if I go in and have a £60 massage, am I paying three times too much because I’m also paying for two people who aren’t going? Could we charge half the price for services and also make more money?
One of the things that struck me when I first looked at this industry is that a haircut costs the same on a Monday morning as it does on a Saturday afternoon. We don’t do that in other industries: if we fly from Luton at 3am we expect to pay less than if we fly from Heathrow at 5pm. We understand price fluctuates as demand goes up.
This kind of pricing doesn’t have to impact on brand image. Four Seasons never discounts but no one ever pays rack rate. The price changes through the week, and month to month to reflect demand, so its not fair to say you can’t do luxury and also do discounts: you can yield manage. However, yield management can’t work if your prices are printed and distributed to clients; it can only really happen in an industry built on digital distribution so we need to get online first.
Lopo Champalimaud is chief executive of salon bookings and review site Wahanda. He spoke on topics including yield management at the Beauty Companies Association annual meeting at The Magic Circle in London in November.
This article is taken from the January issue of Professional Beauty. As a subscriber, you can read many other expert advice plus industry news, product and treatment reviews and much more. Make sure you never miss an issue by subscribing here for just £37 for the print edition, or buy a digital subscription here, which gives you access to the full magazine online for just £4.99 a year.