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Recently, I was driving through Knoxville, Tennessee, on my way to visit salons in North Carolina. It was getting late and I had not made a hotel reservation, so I pulled over at a rest stop and began scanning through my hotel mobile apps in search of the best deal on a room.
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Traveling about 100 days each year, I have become a gold or platinum member of almost every hotel, airline and car rental rewards program – and I am fiercely loyal to a few select brands. I have learned to appreciate the “cash value” of the perks that each rewards program offers – and I am adept at surfing the net in search of the best deals and upgrade options.
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Comparing hotels, I found that the Hilton in Knoxville was $139 per night and the Holiday Inn was $119 per night. I was familiar with each location, both of them four-star hotels. On the surface, saving $20 for a night at the Holiday Inn seemed like the obvious choice. However, as I drilled down into the additional benefits of each rewards program, the Hilton (in this case) proved to be the better choice.
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Happy to Pay More
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While both hotels provided free breakfast, Hilton’s included a full, hot buffet and omelet bar, while the Holiday Inn offered the standard, continental breakfast fare. Upon check-in at the Hilton I would also receive a “welcome bag” that included two bottles of water and snacks. Holiday Inn would provide one bottle of water – no snacks.
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While both would upgrade me to a higher room class (at no additional charge), I knew that at the Hilton, there was a better chance of getting a deluxe-king suite. And to tip the scales, I was just two stays away from achieving diamond status with Hilton. Advantage: Hilton.
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So, simply by including a few extras that probably cost them less than $5, Hilton was able to steer me into paying $20 more … and I was happy to pay it! The “perceived value” of the hot breakfast, the welcome bag and the upgrade potential allowed my mind to quickly calculate the added “cash value” of the perks and help finalize my purchasing decision.
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Keeping Butts in Your Beds
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In past articles, I have highlighted the stark similarities between the hotel and tanning salon industries. In fact, it was my old friend and founder of the Holiday Inn hotel chain, Kemmons Wilson (R.I.P.) who summed it up best when he said to me many years ago, “our two businesses are very much the same – it’s all about putting butts in beds!”
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In much the same way that hotels offer standard rooms, deluxe rooms and suites, tanning salons also offer varying levels of equipment to appeal to our demanding clientele.
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Hotels have kept pace with changing consumer preferences by adding fitness equipment, hot tubs, saunas, etc., as standard amenities. Tanning salons have also pro-actively evolved by adding a variety of spa-centric products and services. And by bundling these products and services into effectively priced packages, both hotels and tanning salons are able to maintain price integrity while attracting more customers.
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However, I often find that tanning salon owners could do more to maximize the true potential of the “value added” strategy.
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Perceived Value vs. Actual Cost
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The similarities between the hotel and tanning industries forks when comparing how the two businesses generate income. Whereas hotels must have actual foot traffic every day, 365 days a year, to fill their rooms and generate income (the average hotel needs to operate at about 70 percent of capacity on a year-round basis just to break-even), tanning salons have the advantage of “pre-selling” packages and memberships. This allows salons to generate revenue whether or not their customers actually set-foot inside the business.
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Tanning salons also have a major advantage when it comes to the “retail price-to-cost ratio” of products and services. When hotels offer free breakfast as a perk, the retail purchase price-to-cost ratio is about 3/1. (The $15 menu price of the free breakfast actually costs the hotel about $5.)
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A single session in a Level-5 tanning system sells for about $20 and costs the salon about $1.50 per session to operate (lamps and electric). This generous 13/1 ratio provides salons with a highly effective, cost-efficient marketing tool.
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When salons include a few free sessions in the upgrade units with the purchase of select packages, etc. tanners are quick to recognize the “perceived cash value” of the perks. Using this strategy, the salon will have accomplished the goal of offering a “discount” without lowering prices.
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The Salon-Spa Advantage
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Today, many salons also offer services such as wellness pod sessions, infrared body-wraps, custom spray-tans, red-light sessions, massage chairs and others. Like tanning beds, these systems do not require an in-room attendant, are relatively labor free – and also offer similar retail price-to-cost ratios. While these services should be treated as individual profit centers, I recommend that salons also utilize them as marketing tools to attract new customers and help sell everything you offer.
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You can initiate this strategy by creating “spa packages” that are separate from your tanning packages. List and price each spa service using single-session, multiple-session and monthly-package pricing. Once you have established the “perceived value” for each service, you can then include free spa service sessions to help sell your tanning packages – and everything else in the salon.
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This strategy (a) adds value to your packages, (b) provides the appearance of a healthy discount, and (c) maintains the price integrity of your most lucrative packages.
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In effect, you have provided a $20 discount that probably cost you about $1.50 in actual equipment operating cost. And by giving your customers a choice from the “spa menu,” it keeps them aware of all the services you offer and provides them with a sense of decision-making control.
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This strategy can be easily modified and applied to all packages and also used to sell lotions, accessories, clothing, etc.
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NOTES: Always list the full single-session price for each service added to demonstrate the true “cash value.” Do not list the upgrade value. Also, make it clear that customers must use the free sessions within the stated time period of the package and cannot accumulate the free sessions.
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Remember, your goal is to keep putting “butts in your beds” and generate the maximum amount of dollars-per-customer-per-year. Simply put, if 500 customers spend $240 per year ($20 per month) in your salon, it equals $120,000 – no matter how you slice it!
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If you would like more information on sales & marketing strategies, including a Free Equipment Operating Cost Calculator, write to jerry@istmagazine.online.
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For example:
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Level-1 Tanning $24.95 per month
PLUS your choice of (1) of the following:
- Level-5 Session = $20 Value
- Wellness Pod Session = $20 Value
- Infrared Body Wrap Session = $20 Value
- Red-Light Session = $20 Value
- Spray-Tan Session = $20 Value
