I personally hate seeing discounts in salons and spas.
But I've heard owners say countless times discounts and coupons work for my business.
Now, discounts can increase sales, and yes, discounts can increase bookings during a promotion.
But in my 20 years of experience as a revenue trainer and business consultant I believe, discounts damage business.
Discounts attract the wrong consumers, damage the reputation of the business, and can lead to a financial crisis.
Let me explain why discounting is NOT WORTH the revenue it generates.
I'm Caroline Turner founder of The Salon Money Maker and this Newsletter I'll cover why I advice business owners not to discount services or home care products.
There may be times when it's tempting to drive sales with a discount or coupon promotion, a special event, day or week with a big discount or coupon.
I see it so often, a text message 50% off for lapsed clients, poster in salon windows with 25% off... website discounts, student discount, new client discount, introduce a friend discount!
For owners seeing an increase in bookings and or sales it can give the FEELING "this works", I have growth or an offer can allow a business owner to breath for a moment, if the business is quiet or just keeping its head above water, struggling with bills.
For clients and those bargain hunters (transaction clients), they get a great deal and that makes them FEEL great. But if a salon or spa keeps discounting or has LOTS of discounts available that's when BAD THINGS HAPPEN.
Why discounts are dangerous.
Research by leading experts and universities across the world have studied the impact of discounts on consumers and their attitudes to businesses that offer discounts.
How consumers perceive the value of the service or the product that's discounted.
And the studies found;
Discounts devalue what's offered
If for example the listed price for a facial or a colour was £/$70 but a 25% discount was offered and worse IF repeated, then the clients perceived value of that service drops.
The client will no longer FEEL the colour or facial is worth £/$70, the perceived value drops to to the discounted price of £/$52!
The client, consumers view of the service value changes.
Discounts in the mind of clients devalues what the service is worth. When clients pay a reduced price, that discounted price becomes what the service is worth. But to add to the drop in value the full price becomes more painful.
Scientists have studied at Carnegie Mellon, Stanford and MIT universities to name a few how the brain reacts to spending money and the research has PROVED that spending money causes the brain to react as if in PAIN.
Spending money actually hurts!
When a discount is offered it makes spending less painful, short term gain. BUT, when the client returns, and is asked to pay the FULL amount not only is there a risk that they feel it's not worth it (perceived value), BUT the FULL price is more painful.
Research in consumer behavior has been able to SHOW, PROVE DISCOUNTS ERODE value.
Of course the other serious impact is profit, if the discount reduces or removes the profit or is a loss making promotion, whilst the revenue on the day may seem an achievement it doesn't take long for the next bills to arrive and so can start a financial black whole.
A circle of repeating discounts that just makes the financial whole deeper and deeper.
If a salon or spa discounts frequently, repeating discounts, this can be a disaster. Clients sit back and wait, because they no longer value the service at the full price. And they'll wait for the next discount.
So, what should a Salon or Spa do?
It's that simple. Remove discounts and look to use marketing methods that are focused to adding value.
It's used across many industries and there are many methods to get a higher spend with perceived extras that have a financial value or a perceived value.
Buy a new car, get free servicing and insurance for 2 years
Buy insurance and get 2 for 1 cinema tickets
Shop at X supermarket this week and get tripe points
Avoid discounts and add value.
In an up and coming Revenue Newsletter I'll share different ways to use added value marketing, so sign up below.
If you know other salon or spa owners who may benefit from reading this article then do share. Its my mission to share my knowledge in how to make money to support salon and spa business big or small.