To help you achieve your financial goals, we will begin by objectively examining each segment of your business including all cost centers (rent, labor, loan payments, etc.) and profit centers (UV-Tanning, Spray Tanning, Spa Services, Product & Accessory Sales).
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Dollars per Customer per Year – One True Measure of Financial Health
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Start by analyzing your customer database to determine how much each one spends on products and services on a “per year” basis.
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Spending Categories
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Divide your total gross sales for each service offered by the total number of “active” customers in your database. I define “active” customers as those people who have spent at least $1 in your business in the last 12 months.
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Next, divide your customers into categories according to the amount of money they spend. Every salon owner should be keenly aware of the total number of active customers in their database, as well as how much money they spend daily, monthly and annually on the products and services offered. Your software should be able to run a query that will categorize customers according to the amount of money they spend. (If your software program does not have this feature, consider a different software.)
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Do this for each service you offer, as well as for product and accessory sales. When finished, you should have a business profile similar to the following example based on a salon with 2,000 active customers in the database:
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Dollars per Customer per Year by Spending History
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- $1-$25 = 100 customers
- $25.01 – $50 = 200 customers
- $50.01 – $75 = 300 customers
- $75.01 – $100 = 600 customers
- $100.01 – $150 = 400 customers
- $150.01 – $200 = 200 customers
- $200.01 – $300 = 150 customers
- $300.01+ = 50 customers
- Total Annual Gross Sales = $200,000
- Active Customers in Data Base = 2,000
- Dollars Spent per Customer per Year = $100 ($200,000.00 / 2,000)
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Dollars Spent per Profit Center per Year
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- $200,000 Total / 2,000 Customers
- UV-Tanning: $120,000 / 2,000 = $60 per customer; 60% of total sales.
- Spray Tanning: $30,000 / 2,000 = $15 per customer; 15% of total sales.
- Spa Services: $15,000 / 2,000 = 7.50 per customer; 7.5% of total sales.
- Product Sales: $35,000 / 2,000 = $17.50 per customer; 17.5% of total sales.
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My research indicates that the typical tanning salon customer spends between $75 and $125 per year in total on products and services. This spending range has remained little changed over the past 25 years.
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NOTE: The highest I have seen is $200 – $250 per customer per year. And naturally, not every customer will use every service you offer. However, you can use this exercise as a guideline to drill down into your actual numbers and create a more accurate profile of your unique business model.
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I highly doubt that you have a big sign in the window of your salon that reads “Unlimited Tanning $100 per Year!” However, when you reverse engineer your annual sales history that may just be what you are achieving.
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There is no greater tool for creating steady cash-flow for your business than an EFT or monthly membership program.
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Generating More Dollars per Customer per Year
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As you review each customer’s spending history, you will discover “pockets of concentration” where the most opportunities exist for increasing sales. One of the easiest and most cost-effective ways to increase sales across the board is to give your customers cash to spend at your salon.
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While that may sound counterintuitive, in reality, it has proven to be the most effective marketing tool I have ever used.
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Here’s How it Works:
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When a guest is checking in for their tanning session and you are going through the standard ritual of “name, bed #3, 10-minute session, please don’t pee in the trash can,” enthusiastically inform the guest that they have just won $10 to spend at your salon any way they choose!
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Immediately present the guest with a bottle of moisturizer that retails for $20 and state: “This bottle sells for $20 but it’s yours right now for just $10!” Pay close attention to how your guest responds, as well as your ability to spontaneously close the sale.
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Test this approach on three or four customers and work out all the kinks. Feel free to offer varying “prize” amounts and use higher-priced products accordingly. Once you are comfortable with this strategy, incorporate it into an email or text program.
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Using their spending histories as a guideline, send 10-20 “select” customers an email or text informing them that they have just won a $10 gift card to spend at your salon. Let them know that they have 48 hours to redeem it and that they must respond immediately to claim it.
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Again, measure customer reactions and track all sales generated by the program. A good salesperson should easily be able to “upsell” the free $10 e-gift card into a much larger sale.
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I first shared this strategy several years ago with a handful of salon owners.
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Today, there are many salons that use this type of promotion to jump-start and extend their selling season. Every December or January, they send each customer a $10 e-gift card (some do $20+) to spend at their salons. In June, they do the same thing to extend their season and keep customers engaged.
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Yes, you need to include expiration dates and a few disclaimers and limitations as needed. Just don’t get paralysis from analysis and limit the full potential of the promotion.
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Focus on Singles – Not Just Home Runs
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You don’t need to spend thousands of dollars on promotions to increase sales and profits. Your existing database is your most effective marketing tool for everything!
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If every customer in your database spent just $2.50 more per month in your salon, it would probably allow you to purchase a new piece of equipment every year – and pay your rent.
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For Example:
2,000 customers x $2.50 = $5,000 per month; 12 x $5,000 = $60,000 each year!
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Analyze Session, Package & Membership Sales
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Next, run a report that lists your year-to-date sales for all your individual sessions, multi-session packages and membership programs (EFT and month-to-month) according to the total revenue generated by each category. List amounts from the highest to the lowest.
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Then, compare each individual category amount against your total sales generated for all services. We want to determine which packages are contributing the most to your overall income – and which are generating the least. At the same time, we want to determine which equipment is being utilized the most – and which is being used the least.
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For example, let’s say that your best-selling package is an EFT membership on your level-4 equipment. The package sells for $39.95 per month and is responsible for 15% of your total annual sales. Based on industry averages, we can conservatively estimate that the typical customer purchasing this package will utilize eight (8) sessions per month. We can also estimate that the cost to operate a standard, level-4 UV tanning system, with (48) 160W low-pressure lamps and (4) 500W high-pressure facials, is approximately $.70 per session for lamp use and power consumption.
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Accordingly, the cost to operate the equipment for the eight sessions utilized at $.70 per session is $5.60. Deducting this amount from the $39.95 per month selling price leaves the business with an adjusted gross profit of $34.35 per package.
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Now, let’s assume that the monthly rent for your salon is $2,000. Your salon would need to sell and maintain 58 level-4 memberships each month to cover the cost of your rent.
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By conducting this exercise, you can determine your best-selling service-related packages and how many of each you must sell per month to cover the expense of each cost center.
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NOTE: The prices you charge for sessions, packages and memberships should be based on the costs associated with your unique financial situation, your equipment mix and your business model. It should not be based on what the competitor down the street is charging, or worse yet, what some stranger on social media told you to charge.
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Your software should be able to run a query that will categorize customers according to the amount of money they spend.
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Building & Maintaining EFTs & Monthly Memberships
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There is no greater tool for creating steady cash-flow for your business than an EFT or monthly membership program. Even if you have a smaller salon or are reluctant to institute a full-blown EFT program, you can still create a monthly membership program (manually) that encourages customers to remain loyal to your business while also increasing the total dollars generated per customer per year.
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Each EFT or monthly membership offered should include incentives to join and stay on the program for the long term. As I have stated in past articles, the average life of an EFT tanning salon membership is 4-6 months. The average life of an EFT membership at a health club is 2.5 years!
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You need to create EFT Membership Programs that give your customers every reason to join – and absolutely no reason to ever quit.
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For example:
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- Level-1 EFT Membership = $19.95 per month
- Includes the Following … every month!
- Unlimited Tanning on Level-1 Beds
- (1) Free Level-5 Session ($20 Value)
- $10 Salon Gift / Rewards Card
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NOTE: The $10 should be in the form of an actual electronic gift/rewards card that must be used each month and cannot be accumulated. This helps create a sense of urgency!
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Review the logic of this pricing promotion:
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The free level-5 tanning session is really just “substitution” as the tanner was going to utilize a bed, anyway. The additional expense to you is the difference in operating cost between the level-1 and the level-5 unit, which is probably less than $1.
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The $10 e-gift/rewards card might cost you $3 if the guest selects a $10 product. However, most salons offer very few products in that price range; and provided you have even basic “upselling” skills, the free e-card should actually turn a profit.
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And if you really want to keep customers for the long-term, make every 7th month of the program FREE! That is, all EFT members who pay for six consecutive months get the 7th month FREE. You can modify the program as needed for your business model and each level offered. The idea is to provide incentives to extend the life of each membership for as long as possible.
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Extending the life of each membership by just one or two months each year will have a dramatic impact on your bottom line.
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Equipment Operating Cost per Session
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Following are the estimated costs to operate some of the most popular models featured in salons on a per session basis for lamp use and power consumption.
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32-lamp bed, (0) facials, 15-min. session
- Lamp Cost: $.10; Electrical Cost: $.22
- Total Cost per Session: $.32
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32-lamp bed, (3) facials, 15-min. session
- Lamp Cost: $.13; Electrical Cost: $.23
- Total Cost per Session: $.36
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34-lamp bed, (3) facials, 15-min. session
- Lamp Cost: $.14; Electrical Cost: $.29
- Total Cost per Session: $.43
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40-lamp bed, (3) facials, 12-min. session
- Lamp Cost: $.20; Electrical Cost: $.43
- Total Cost per Session: $.63
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46-lamp bed, (3) facials, 12-min. session
- Lamp Cost: $.21; Electrical Cost: $.46
- Total Cost per Session: $.67
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48-lamp bed, (4) facials, 10-min. session
- Lamp Cost: $.22; Electrical Cost: $.48
- Total Cost per Session: $.70
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52-lamp bed, (4) facials, 10-min. session
- Lamp Cost: $.28; Electrical Cost: $.58
- Total Cost per Session: $.86
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30-Lamp High-Pressure System, 10-min. session
- Lamp Cost: $.60; Electrical Cost: $.75
- Total Cost per Session: $1.35
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48-lamp booth, 10-min. session
- Lamp Cost: $.19; Electrical Cost: $.29
- Total Cost per Session: $.48
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Spray-Tans (Auto-Booth or Custom)
- $2.50 – $6 per session, depending on solution cost per ounce, ounces used per session, plus accessories.
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Please note that the above are estimates only and will vary depending upon the actual equipment used, cost per lamp, as well as additional demand charges from power companies that are often applied during peak usage.
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To assist you, we have created a FREE Equipment Operating Cost Calculator. Simply write jerry.d@suddenlink.net, and I will send it to you – compliments of IST Magazine.
