Beauty Industry “What are you charging?”

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What are you CHARGING?

Do you have a systematic approach to setting the price for your goods or services?  Do you think it is simply a matter of estimating cost and adding a standard markup, or letting the competition set the price?  If so, the latest advice from the experts will come as a welcome surprise and a boom to your bottom line.

A well-known market research firm recently recommended the following advice to its clients:  In the face of sliding scales and thinning profits, what seems downright counter-intuitive — raise prices!

In the past, small businesses and large have succumbed to old, bad habits when it came to pricing; believing the conventional wisdom that if you raise prices, you sell less.   With a price hike, some may call it an eye-opening experience, but in fact, customers want to give you their money.  Looking at what people are willing to pay instead of what value you have to give them for their money is where most businesses mess up!  In fact, the percentage of customers that buy strictly based on price is no more than 15% to 35% in any market.  So by competing just on price alone, businesses are adopting a kind of victim mentality, mistakenly catering to the most fickle and least profitable end of the market.  Most of the business’s customer are relationship or value-based, but by focusing on price, you run the risk of converting them to price-based customers.  Those are the ones that are first to move when your prices go up. 

How do you know if the price is right?  In order to answer that question, you must understand that the right price will boost profits faster than increasing volume.  The wrong price will sink profits just as quickly – no matter how many clients you have – the profit won’t be there.  Possibly it’s not more clients that you need, but more profit?

Hmmm – think about that for a minute.

Now — how about a sandwich?

Essentially, combining your products with your services together into larger packages and the flipside – segmentation, adding or subratacting features on your products/services to target different tiers within a market.  that’s the beautiful thing about a sandwich, it bundles stuff together.  You may lose some money on the meat, but you still get your high margins on the lettuce and the bread.  Clustering products or services builds a stronger bond with your customer.  Keep in mind, this makes it harder for them to cross-check the competition.  Selling one item or service is just a transaction, but once you sell somebody three things, you’ve built a relationship. 

TAKING THE LEAP AND STICKING TO YOUR GUNS!

“What are you Charging?” PART II

Perhaps the most difficult step in changing your prices, however, comes in dealing with your clients’ reactions to them, particularly if you end up raising prices significantly.  Unfortunately, it is your regulars that are going to notice the price increase, so be prepared for the pushback from people you know. 

How your business reacts to the pushback is just as important as finding the best value price for your services/products.

The key to weathering a brewing revolt over your new, higher prices starts with emphasizing the right reasons behind the increase.  You could bring up rising costs, but that’s not going to keep the mirror from fogging!  Instead, you want to justify the new prices by talking about all the things that will positively affect your customers, like new, state-of-the-art equipment, more current training, bringing in the latest techniques, possibly you’ve extended your hours, or you are able to offer new treatments, etc.

Indeed higher prices reflect that you believe what you are giving, what the client is getting, is worth it — make them feel special — a much better representation of who you are!  It is important to highlight the connection between the price and the value.

Not only will your higher price lead to higher profits, it will diferentiate you from the pack. 

Surely there comes a time when counting the cost and paying the price aren’t things to think about any more. All that matters is value – the ultimate value of what one does.

James Hilton (1900 – 1954)

IN OUR NEXT BLOG, WE ARE GOING TO DISCUSS TIPPING.

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Pricing resources:

bizstats.com

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Tags: Beauty Industry, hair, hairdresser, increase, International Beauty Assocation, money, owner, price, prices, profit salon, small business, stylist, value