By Martin Smith, founder of Beauty Salon Marketing - June 2008
Read the article below, or click on this link to download it as a PDF file (approx 256kb) - Getting Through the Credit Crunch - How to Recession Proof Your Salon
Credit crunch, recession, economic downturn, or just a temporary blip? Whatever happens to the economy there are steps you can take to ensure your salon business is a success story during these volatile times. The objective of this White Paper is to show you how.
Which way is the economy going? The indicators are not looking good:
- 3,000 UK businesses have gone to the wall in the first quarter of 2008
- Bailiff business has increased by 21% over last year
- April 2008 had the worst retail sales since 1995
- The average weekly grocery bill has increased by £18
(Source: BBC Money Programme, “Profits of Gloom”, BBC2)
At the same time, house prices are falling, petrol and food prices are rising, inflation is increasing, and home energy costs may rise by up to 40% this winter.
In a recent survey by Professional Beauty magazine, 72% of salon owners said they were worried about the possible effects of the Credit Crunch on their business.
So, are we running full pelt towards a worldwide depression?
But, do you know, the answer to that question actually matters little? What does matter is the revenue you’re currently generating within your salon. What does matter is what you’re going to do to keep and grow that revenue base. Because if you have a high “Business IQ” or have access to the right help and advice, your salon can do very well in the current economic climate.
I invite you to read the following white paper to help you survive, and even thrive during these potentially volatile times.
How do you know if an economic downturn will affect you?
Think local, act local. Don’t listen to the gloomy worldwide forecasts. (Very often these are used by the media to ‘hype’ up the story into something more dramatic) What matters is what’s happening in your area. So, think and act local - after all, your salon may be fully booked. Your area of the country may not be affected by the wider economic changes.
There are certain pointers you can easily look at, to find if your area is looking at a downturn. The local restaurants are a good starting point. Generally, in times of financial hardship, the first area people cut back on is eating out.
Take a drive around your local area on a Saturday night. How full do the restaurants look? If they’re empty then it may be a sign of trouble ahead. But remember, if people aren’t eating out they’re spending more time, and therefore more money, at home.
(Hint: can you turn this to your advantage?)
It might not be all doom and gloom
Health and beauty is expected to become the fastest-growing retail sector this year, despite lower consumer spending, according to Verdict Research’s “UK Health and Beauty Retailers 2008″ report (quoted in Marketing Week, May 23, 2008)
The increase in spending is being driven by people upgrading to more expensive ranges, products claiming improved benefits at relatively low costs, and more male consumers buying products.
Carol Ratcliffe, retail analyst at Verdict Research and author of the report, says, “In uncertain times people are still willing to spend money on making themselves look good and feel good. If you’re holding back from buying expensive items, there is more scope for smaller indulgences. Health and beauty products are ideal for this: it doesn’t cost much to treat yourself and even premium brands are relatively accessible.”
Are you ready to sell more retail products? What are the advantages that will make people want to buy from you (rather than going to Boots, Tesco’s or Sainsbury’s) when they want to indulge in some personal pampering? And how are you going to communicate those advantages in your advertising and face-to-face selling?
How can you promote your salon so that clients who are cutting back on their annual holiday, or the new car, come to you for the “smaller indulgences” that will lift their spirits?
Recessionary pressures, or not, it is still prudent to be positioning your salon to bear the brunt of slow economic times ahead. These steps will put your salon in a strong position whatever the economic climate.
How do you manage a salon through economic turbulence?
Within any business there are three things you have to keep focused on:
- Generating new business - obvious really. But without new business your salon will fail.
- Getting existing clients to stay with you and spend more - it is actually 5 to 6 times cheaper to sell something to someone you already know than it is to sell something to someone you’ve never met
- Keeping costs down to an absolute minimum. This not only means keeping financial costs in check, it also means reducing waste where ever possible.
By planning ahead, you can work more effectively through volatile economic times.
Focus, focus, focus
Let’s take the three elements in reverse order:
First, keep costs down to an absolute minimum. And, in tough times, you should also be looking to reduce elements of risk to your business.
This does NOT mean spending as little as possible. What it DOES mean is that every single penny is spent as effectively as possible, with the smallest level of risk to return.
These volatile markets could also present opportunities. If everyone starts spending less, suppliers will probably be willing to work harder to earn your business. Keep your eyes open for bargains if the downturn continues.
Also, for example: Can further discounts be obtained from suppliers? Will they look at an effective joint promotion? Can you secure a discount for a bulk order? Can you change your terms and conditions more favourably?
Cost savings can also be found in unlikely places. For example, take a good look at your bank charges. Can these be reduced at all? Similarly, insurance can be a source of savings. Retail property may also be coming available, if other businesses are not doing as well as you - are there any opportunities there?
Susan Routledge, owner of Finishing Touch Health & Beauty Clinic, in Consett saved a massive £3,500 by simply checking her bank charges.
Keeping a close eye on costs now will mean that you’ll be in a good situation to profit should one of your nearest rivals find themselves in difficulty. It is unfortunate when other salons fail, and profiting from another’s loss can be distasteful. However they may be willing to sell you their client listing.
Or, if they are unwilling to sell their listing, what promotional techniques could you employ to attract that pool of people who are looking for a new salon to go to? And what about their star members of staff? Would you be in the enviable position of helping them maintain their income?
Similarly, nearly new equipment could be had at very low cost. And will the equipment manufacturers start to struggle as other salons cut back on investment? If you wait a few months before buying equipment, will you be able to strike a better deal?
In short, ensure that every penny spent is spent as effectively as possible, with the minimum amount of risk associated with the expenditure.
Get existing clients to spend more
Take a good long look at your client base. Are you really gaining the maximum share of the money you could be getting? Having worked with salons up and down the country for the last 3 years, I can tell you, there are very few that can actually answer ‘yes’ to this question.
Whether it be a one person business or an award winning salon, they are almost all letting sales slip through their fingers.
And why? The answers I’ve heard include:
“I didn’t want to sell it to them. I didn’t think they could afford it.”
“I’m not a sales person I’m a therapist”
“I told them they could get it cheaper elsewhere.”
“I don’t like selling.”
Selling is everything, it is what keeps your salon in business. And once you get a taste for it, it can even become fun!
If we are in for tough times, the salons that survive will be the salons that sell well into their existing client base. And we’re not just talking retail sales here. We want to sell them retail for sure, but we also want to up-sell them into buying more services and treatments.
But we do NOT want to sell anything to anyone if they don’t need it. We want to sell ethically, after all. No, you need to make sure you give each and every client the maximum opportunity to gain access to the RIGHT treatments and retail investments for their individual needs.
After all, you’ve worked very hard to become the highly qualified professional that you are. This skill and knowledge should be shared with the client, so that they have the products that are right for them. It is only right that they purchase these products from you. You understand their needs best. You have carefully researched and chosen the products you supply. Who better to advise your clients and help them to buy the most suitable product? Rather than whatever generic product is on offer at Tescos, Sainsbury’s or Boots.
Get your execution right and people will still spend with you, even in a recession. People will always spend. Remember, the research suggests that if they are cutting back on large purchases (like the new car, or the expensive holiday) they may spend more on “small indulgences” to cheer themselves up! BUT they will only do so with the right salons. You have to make sure your salon is one of the ‘right’ salons.
Look for other revenue generating opportunities
What other tactics could you employ to generate revenue opportunities? For example:
- If the research is correct, the fastest growing sector for health & beauty is men. Do you currently serve this market effectively?
- What new treatments could be introduced to your salon? Are there any revenue opportunities that your clients have requested but you are not yet satisfying?
- If money is tight, and you know your clients are spending more time at home, could you package home care regimes for them to follow?
There will be literally thousands of avenues that could be explored for new revenue opportunities. The successful salon owner will choose those opportunities that give the highest return for the lowest investment and risk.
A great tip when looking for new revenue opportunities is to ask your existing customers! What other beauty products or services do they buy? What else would they like to see you offering? An effective customer survey of this type can open up great revenue generating opportunities.
Keeping the clients that you’ve got
In tandem with getting existing clients to spend more, you also want to keep the clients you’ve got. You want them to stay loyal to your salon. This can be achieved in a number of ways:
- Loyalty schemes - always a good way of rewarding regular customers. Used by Tesco’s to great effect
- Establishing a ‘club’ where members join - used very effectively by gym memberships
- Providing special offers to highly valued clients only
- Regular news letters and correspondence
- And much, much more
The real trick here is not to rely on just one strategy. There are literally hundreds of ways of making sure that you keep your clients coming back for more. The business-focused salon owner will employ as many of these strategies as they can.
If you can, take a look at other local businesses who are doing well despite the economic downturn. Not just salons, but any other local service industry. What makes them successful? How do they sell and market to attract new customers, and keep existing ones?
Could you copy their strategies? Could you even run a joint promotion with them?
Generating new business
Every salon needs to be generating new business, whatever the economic climate. Again there are as many ways to generate a new client as there are ways to keep them coming back for more. For the salon owner there are two major ways to generate new business:
- Referrals
- Advertising/promotions
Referrals
Every salon owner knows about the power of referrals. What distinguishes the great salon owner from the average salon owner is that one makes referrals happen, whilst the other hopes they will happen.
The true professional salon owner has an active referral programme - a programme that actually drives the referrals into their salon, because they make sure that every happy client becomes a “salesperson”. This effectively means that:
- They essentially have a HUGE ‘sales force’
- They richly reward each ‘sales person’ for making a sale
- Every ‘sales person’ is motivated and keen to generate sales
- They monitor and reward the top performing ‘sales people’
The other salon owner lets the referrals happen for them. Simply sitting and waiting for the referrals to happen. Trusting to luck.
The professional owner will stand a far higher chance of seeing out hard times than the other owner. Make the referrals happen!
Salon Advertising / Promotions
In times of recessionary pressure, the knee-jerk reaction of many businesses is to cut back on advertising and marketing expenditure. Research suggests that this is a big mistake (see report “Proactive Marketing During Recession”).
But didn’t we suggest cutting back on expenditure? Yes, but remember the main thrust was to cut back on ineffective expenditure. Salon owners should look at their advertising and promotional spend. You need to know what is working for you and what is not.
- Strike out any pretty, ‘branded’ advertising.
- Strike out any advertising that you cannot measure the results of.
- ALL marketing spend should be measurable.
- ALL marketing and promotions should show a return on investment
Avoid the knee jerk reaction to reduce, or even, eliminate marketing spend. Embrace advertising and promotions that you can measure. Any money spent on advertising should generate direct revenue into your till. If it doesn’t, stop it. Immediately!
Any salon should also have a portfolio of advertising and promotions. Simply relying on one type of advert, or one type of media, is dangerous if it ever stops working for some reason. This portfolio may include:
- Using SMS texting
- Doing regular door-drops / leaflets
- Making use of regular newsletters or emails
- Investing in a lead - and business - generating website
- Using effective newspaper/magazine advertising
- Establishing direct mail campaigns
And more. There are literally thousands of ways of advertising and promoting your salon. Ensure you have an effective portfolio to call upon. Do not rely on luck!
Conclusion
It seems likely that recessionary pressures are prevailing. Some salons will fail during these times, whilst others will flourish. Determining whether your salon thrives or wilts will ultimately be your decision.
Act now, by putting measures together that reduce ineffective spending, keep the clients you’ve got coming back for more (and spending more), keep generating new clients, and you’ll be sure to weather the storm.
Next steps - Consult the Professionals!
It can be lonely running a salon, especially in difficult times. But you don’t have to go it alone, help is available -
Consult your accountant - he or she should be the best person to help you look through your figures and work out where you may be able to make savings, spend more effectively, or “trim the fat”.
Small business advice - in most areas there are small business advice services (like BusinessLink). The quality of the advice varies, so ask other business owners if they have used services like these, and who they would recommend.
Watch the Free Salon Marketing videos and start taking your salon marketing to the next level
Comments? Suggestions? Let me know what you think of this White Paper. Email me at martin@beauty-salon-marketing.co.uk
