The dangers of discounting

When times are quiet salon owners can feel tempted to discount services and slash product prices.

Take a look at beauty salons and view their menu to see the rise in the level of discounting, as owners clamour to compete for business ‒ but just how damaging can this be for your brand?

Daniel Dickson, the managing director of DMK Australia and New Zealand, believes the rise in the level of discounting is driven by fear.

“I often see a lot of discounting for the sake of discounting. There is the fear of competitors, fear of losing customers, fear that your product quality is not good enough,” he says.

He believes pricing should be developed with actuals including true expenses, forecasted profit margins, and market research, rather than by emotional reactions or by “feel”.

His top tip is to never under-sell yourself, take an objective and formulaic approach and be prepared to back yourself and the quality of services and products you are offering at an appropriate value for your customers.

“Profit is not a dirty word, especially when I see very dedicated business owners who work crazy hours, often for little or no wages. Value the efforts you put into your services and your business, and your clients will too.”

He says salons should have their pricing structures set up so they have great potential to up-sell, bundle and package services to deliver greater value for retail customers whilst maintaining and growing profits.

“The best business strategy is a satisfied customer who will return again and again. Imagine if you could grow the spend from each of your customers without compromising on the profit return to your business. Manage your add-on service or product expenses smartly to be sure to increase profits.”

Meredith Langley, owner of The Beauty Room Cosmetic Clinic for more than 20 years, says she won’t discount and pinpoints cost-cutting as one of the major reasons that salons fold within the first few years of business.

“Salons make the mistake of trying to attract too many new clients, too quickly and they end up being the wrong type of client. Salon discounts can really affect your profit too – they are really easy for your staff to sell and they’ll make you a quick dollar but they can cause a lot of damage to your business. Take for instance Shop-A-Docket, they can really make your salon look cheap, nasty and desperate.”

Meredith believes offering bargain beauty treatments can put staff under a lot of unnecessary pressure. “The extra staff hours, cost of products needed to accommodate them, and not being able to service all your loyal existing clients because you’ll be too busy trying to fit in all the discount clients. “Our clients will come back to us, not the discount.”

After spending more than 25 years in the beauty industry salon owner Catherine Hottes from Skin Aesthetics agrees with the perils of discounting and says it can cause clients to be “jumpers” who are not loyal and are only looking for the next special in the salon. She recommends offering alternatives to clients to build a relationship by offering add on services or product packages.

“I don’t discount. I reward my loyal clients with add ons. My clients appreciate my hard work and know I’m dedicated to achieving maximum results for their skin’s health.”

But other beauty businesses such as My Cosmetic Clinic which provide both surgical and non-surgical cosmetic procedures across NSW including anti-wrinkle injections, fillers and rejuvenation treatments reveals they turned to Groupon to attract new customers when opening a regional salon and have already sold 2400 vouchers that has helped boost business.

Far from having a detrimental effect on the business Cosmetic Surgeon Dr Masood Ansari says it has ensured a steady stream of clientele.
“It gives us an exposure to the market we would never have been able to explore,” she admits.

“The whole Groupon experience is flawless and always surpassed our expectations! We find the Merchant Centre to be a useful tool too. You can keep the live track of all the sales, vouchers redeemed so far, and the payments made. It’s a good one-stop information app,” she says.

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