Five Ways to Improve Profit with Strategic Pricing

Five Ways to Improve Profit with Strategic Pricing

Here, we bring you some great tips on pricing within your salon from Simon Harris of My Salon Manager

With salons closed, this is an excellent time to review your salon pricing. Opinion is divided as to when we do reopen, will clients be ‘beating down our doors’ to get their hair done? Or will a general feeling of nervousness prevail with clients looking for discounts?

Sometimes we must discard our preconceptions with price and almost start from a blank canvas. We get a bit bogged down with prices we have always charged, what the competition is charging, and what our staff think we should charge. The danger is you end up forgetting that it is the client who is choosing the services they have, and that price can be a barrier for some clients. Gender neutral pricing is starting to appear in London salons, but due to the high proportion of low-priced barber shops around the country, it lowers the perception of the value of a men’s haircut.

Regarding a sliding scale hourly priced model - where I believe all pricing must be based on an hourly charging model, presenting the pricing in a clear, client friendly way - is key to attracting and keeping your clients.

Pricing is based on four factors:
  1. Environment: what is your salon like? High-end designer salon, or boutique quirky salon
  2. Location: high street or secondary location? First floor, or ground floor: affluent area or not?
  3. Monthly fixed overheads - how much does it cost to open your salon doors BEFORE you pay a single member of staff, buy a tube of tint or a bottle of shampoo?
  4. % of retained clients
Five Ways to improve profit through strategic pricing
  1. Analyse your actual charge rate per hour. Your charge rate per hour must give you a comfortable profit margin after paying wages, stock and fixed overheads such as rent, rates utilities etc. Then all your prices should be as near to that desired hourly rate as possible. Then add on an additional cost of product. Remember that products used in highlighting can be as much as 25% of the whole service!
  2. Identify your most popular services. Use your software to clearly show which services you do the most of and importantly have the highest rebooking rate. If it is cut and finish, and perhaps half head highlights, then those services could increase more, than perhaps other, less popular services.
  3. Ensure that within your salon you have at least 3 tiers in your price structure (4 if you have 8-10 stylists). This allows clients to move from one tier to another depending on their financial circumstances. It also creates a clear career path for stylists to progress up through the various tiers based on their performance. It’s vital that you write up some criteria for promotion based around their takings to target %, and their re-booking %.
  4. Increase selectively - never all your prices across the board - and always give your clients at least 4- or 6-weeks’ notice in writing of an increase. Your price list should be at least A2 size and displayed in your window, with the lowest tier on the left, and the highest on the right. I always find it strange when it is the other way around, as clients read from left to right and will therefore perceive the salons prices as high!
  5. If you do wet cuts, and lots of salons do, then your focus should be to narrow the gap by increasing the price of wet cuts so that the difference between a wet cut and a cut and finish is minimal. After all, the real value of the visit is the cut.

Simon Harris