Category: Hair Salon

Chris Parker – SAHJ

A Hair Journal reader recently wrote into the magazine about salons in his area and the extremely low prices they are offering and how is this sustainable to a salon and where are corners being cut? He also mentioned he knows of a few salons who’ve recently closed their doors.

It’s a very good question, if the salon down the road or in the same shopping centre charges more or less than you do for the same product or service what should you do? How can you compete?

When asked to write on this topic I thought at first that it was going to be a very difficult and time consuming task get to the bottom of it because of the need to examine salons in detail on an individual basis. However, when looking at some of the theory behind a pricing strategy we can actually get some good guidance on how to go about deciding on pricing structures for your salon.

Why do you care?

Let’s start with the question of why we even care about this topic? The reader who wrote in to raise the topic in the first place hit the nail on the head when asking the question: “How is this sustainable to a salon” (ie cheap pricing).

I think that perhaps he had begun to answer his own question without realising it, ie by the fact that he noticed some salons had closed their doors leading to a possible conclusion that if you charge prices that so low that they are not sustainable then you will eventually have to close your doors.

The point is that pricing can make or break you, if you charge too much then clients may not come. If you charge too little then you may not be able to make enough money to cover your costs.

But how do you know?

So, how do you go about pricing? Is this something you know inherently? Is it something you learn over time with experience or do you get out the magic 8 ball and ask it? Well, I went to ask8ball.net to ask the question “should I raise my prices?’ The answer I got was “Most likely”

Ok, so there must be more to it than this – but how do you know what to charge?

It turns out deciding on your prices is not a just a matter of gut feel but rather the process can actually be quite scientific. Scientific is good as this implies a formula, something precise and measurable. So what’s the formula so you can all use it and move on ..? Well, maybe it’s not quite as simple a formula and we might need to decode a few terms like Cost Plus Pricing, Competitor Based Pricing, Price Elasticity, Sticky Prices, Supply and Demand and so on to get closer to deciding on how to set your pricing.

What’s the objective?

Before we decide on pricing we need to start with our overall objective. If we take our readers perspective then the objective of right pricing is to sustain, ie to remain in business. This seems like a very negative or limited way to look at things because we generally think about our businesses in terms of achieving growth and making heaps of money while hardly doing any work at all. However, when examined further sustaining your business actually implies that you are being successful because in order to sustain you need to keep clients coming back, pay (and grow) salaries, pay overheads, pay suppliers, compete with other salons and after all of this make enough profit to recoup your investment or the investment of other shareholders in your business. So, sustainability seems imply growth as well.

Services vs Product Pricing

A point worth mentioning at this point is that salons sell both services and retail products. When considering the pricing of these we need to realise the implications. Hairdressing is very interesting in this regard. We have things like Junior Stylist, Senior Stylist and then some guy called John (often the owner) in the price list. So you could come in for a service and pay one price for a Junior, another price for a Senior and then another for a stylist called John.

When it comes to this there is a perception (and hopefully some reality to match) that the gents cut from John for R285 is actually worth it when compared to a regular stylist charging R165, for example. Here you have an example of internal pricing strategies where the same service is being charged at different rates and you have the same challenges about getting pricing right so that clients will be happy to pay and keep coming back.

When comparing with competitor salons then you may be comparing senior stylist to senior stylist, but maybe the other salon doesn’t differentiate in the same way, they only have one price …

Retail on the other hand has less wiggle room. For example, if you sell the same product as a competitor for a higher price then how will you explain that? I can more easily understand if two different brands have different pricing or two different items for the same brand have different pricing but not the same item.

It kind of reminds me of petrol companies that advertise on TV that their product is superior. I’m told that they all generally get it at the same source but then add some of their own special ingredients to make theirs superior. When last did you make a decision to fill up at one station over another because of what they advertised on TV about what was actually in their petrol? You are much more likely to make your decision based on convenience, or service quality or cash back rewards.

Conclusion

So, this is the first article and hopefully we will go further into this topic in order to actually get something usable, but for now if there is one thing that we can take away it’s this quote from Warren Buffet “Price is what you pay. Value is what you get.”

Whatever the prices you set your clients need to believe that the price they are paying matches the value they are getting and so not a matter of the cheapest price but rather the right price.

I have a three boys now. Our four year old is in the stage of learning to tie his shoes. Imagine if my attitude towards him was “oh, my son is just never going to be capable of doing this”. Or when it comes to dinner time I simply let my two year old continue to mash his food into his face rather than teach him to use a spoon or a fork or if I decided that its just too hard to potty train him and I leave him in nappies forever.

Not only would this perpetuate the problem of having children that are not capable of doing things that they really ought to be able to do themselves but it would also send a message to them  (and others around them) that they are somehow inferior to other children and not capable of being taught or held accountable. What a sad scenario this would be.

Then why do owners, managers and administrators continue to treat salon staff in this way?

Are salon employees lesser human beings than all other industry employees on earth? When integrity, basic common sense, basic literacy and basic numerical skills were apportioned were they absent on that day? Does it somehow happen that as soon as you accept a job in a salon that you are somehow downgraded to the maturity and competency level of a child?

The answer must be a very definitive “NO”!

Attitude reflects leadership

The question then, is who is really to blame for the inadequate levels of internal salon management that seems to be prevalent amongst so many salons around the country?

I believe that ownership and management perpetuate the notion that internal salon administration staff are simply not capable of all doing anything that may be expected of them if they were to work in another industry.

The reason I say this is because this said on many occassion. So, if the person who hired you does not believe you have the same basic capabilities as your peers in other industries and they don’t expect it of you then why would you ever believe you are capable of or expected to perform at a similar level.

Case in point

I recently wrote an article about the importance and benefits of simply providing salon clients with a printed receipt. As a result of this one action there would be a number of other benefits that occurred as well. I also used supermarkets as an example and the fact that you would NEVER walk out of one of our big supermarkets without being given a receipt for your purchase.

However, in salons it is all too common that sales are not even entered as they occur. On far too many occasions the salon staff would manually calculate the sale (on a calculator), take the money, give the change and say goodbye. Then later in the day they may (or may not) enter the sale into their system.

Are the staff hired as cashiers at our supermarket chains mentally or physically superior to their salon counterparts? What then is the difference? I suspect it may be linked to the expectations / requirements / demands of management and ownership. They simply would not tolerate a staff member who does not comply with their point of sale procedural requirements. Salon owners and administrators not only tolerate it but they perpetuate it by taking the stance that salon staff are just not capable of anything better.

The salon environment in perspective

In my opinion the operational environment lies somewhere in between a private doctors office and a supermarket. In a doctor’s office the environment will be very calm and quiet. Patients will be required to first make an appointment, then on arrival fill in detailed personal information sheets relating to their medical and insurance details. Without this information you are unlikely to be able to engage in a consultation with the doctor – it’s not negotiable and administration staff will be the gatekeepers that ensure proper procedure is followed. After seeing the doctor you would be presented with a bill, either in person or via the post.

In a supermarket the environment will be far livelier (almost like organized chaos). Unlike the doctor’s office you will not have to fill in any personal information, but you will have to go through one of their check out points. Have you ever tried to get out of a supermarket without buying anything? You feel like a caged criminal trying to escape. It’s almost like the only way to get out is to buy something first.

Now, in a salon environment you have a bit of both. Have a lively environment with more people coming and going than a doctor’s office but not as many as you would have queueing in a supermarket. You have clients providing you with some information like name and number when they make a booking and perhaps a little more information when you do an in salon consultation. Then when they leave they pay for whatever service or product they purchased.

So if a salon is positioned somewhere in between then surely the protocols should be somewhere in-between as well? If you think about it salon staff are required to operate at a level that requires both the ability to work under pressure and also to be able to handle a greater variety of operating procedures as far as transactions go. So the assumption would be that of the three the salon staff member would be the most highly skilled, trained and accountable. Or not?

The root of the problem

The problem is not that salon staff are incapable, the problem is more than salon management and ownership do not believe in their staff or do not know how to develop their staff or do not care to develop their staff. This is very sad when you consider the effect it must have on a staff members motivation levels.

In our company, whenever something has gone wrong, whether it is a process that has failed or something else that resulted in a complaint from a client we as management always have to acknowledge first and foremost that it is a management failure that has resulted in the occurrence. The only exception might be if a staff member is deliberately refusing to comply with what is required of them, but then again see point number one as it is management that hired the wrong person in the first place.

Therefore, whenever you hear yourself saying “my staff will never be able to do that” or “my staff just make so many mistakes” then remember the fact that ultimately you are responsible for everything that takes place in your salon. Your current structure is perfectly designed for the results that you are currently getting. If you want different results then the change has to come from you first and a good starting point is to put a little faith in the human beings you have working for you. Without this any positive results that occur will simply be incidental. If you are humble enough to realise that you may be the root cause of the problem and are trying to get it right but finding it difficult to get the results then perhaps you are the one that needs to get help in order to achieve this.

However, its no good for you to simply try and hire someone to make all the problems go away for you. This is another very common problem seen in the hair industry, ie the flamboyant artist refuses to take responsibility for their business and hires an outside business person to run everything for them. I have seen this fail more times that I have seen it succeed. You have to get involved yourself. You cant flip between hiring someone or doing it yourself. It requires both, hiring the right people and being involved in the process to develop your team and get the results that you expect, require and ultimately demand.