One of the greatest assets small businesses possess is adaptability – the capacity to make beneficial adjustments at a moment’s notice. There are countless ways you can modify your pricing, promotions or sales techniques to make your business more profitable. It’s a lot to think about but, if you’re equipped with the right information, the notion should be more exciting than overwhelming.
By analyzing data on your customers, sales, marketing efforts and more, you can pinpoint the areas where changes are needed and increase the likelihood of your efforts paying off. With the salon management software the majority of salons already have, it’s all right in front of you. If you know what to look for, the data will tell you the whole story of where your business is headed and what you need to do to improve the trajectory.
Basing your decisions on facts, rather than just relying on a hunch or something you expect to work, is the best way to improve your success rate and keep your business continually growing. “Spending the time to analyze transactions, customers, promotions, and packages allows for deployment of new products, promotions, and service offerings without the guesswork of, ‘Will this work?’” says Fierce Tanning owner Claytin Williams.
When you’re caught up in the hustle and bustle of busy season, there’s not much time to step back and think about the big picture, so now is the time to dig into the data and formulate your strategic plans for the future.
“The most important thing to do after the season is to review and upgrade the technology your business runs on,” says Tan-Link Account Manager John Toston. “Having a firm grip on your numbers is the single best thing you can do to get a significant boost in business. You are almost guaranteeing a better return on your investment over any other upgrade you could make.”
You know your business better than anybody, but when you commit to gathering and reviewing data, you will almost certainly pick up on trends and opportunities that you may have missed otherwise.
“There is so much you can learn from your data” says Jeff Oakes, President of Nichesoft, the developer of TanTrack software. “It is also very important to collect as much data as possible. The quality of what you get out of your reports is determined by the quality of what you put into the data. If you see a box on a screen, fill it out. There is always a reason for that bit of data that you may not be aware of at that moment.”
The data these salon software systems provide you on a daily basis is immense, but in searching for the most impactful adjustments you can make, start by considering what the numbers tell you about marketing, pricing and buying options, equipment, products and employee sales performance.
Some changes will take longer to pay off than others, but right now, the best way to make more money is communicating with your current customer base with targeted promotions. By categorizing your customers based on their purchasing habits, you can improve your text and email marketing by personalizing messaging and offering something you know they’ll be interested in. And, you can also elevate your social and search marketing by breaking down habits by demographics and to refine your targeting for different offers on Facebook, Instagram and Google.
“Your marketing segments and subsequent marketing can be as creative as you are. The simplest ones are segments such as age groups, gender, last visit date, or birthday. Once you have your segments, you can really test out some very targeted marketing campaigns to get people coming in the door. Many of these can be created once and automated,” Oakes says.
To make an immediate impact and build up your off-season sales, the first thing you should do is break your customer list down based on buying habits and identify offers that will drive people into the salon. Texting or emailing offers to specific segments will not only increase your redemption rate, but also allow you to promote more options without overwhelming your entire customer base with too many offers that aren’t likely to interest them or give discounts to people who would be purchasing anyway.
“We separate into multiple categories: Members, non-members, spray tan customers, UV customers, product customers, etc. We mark accounts ourselves when we think they fit into one specific or multiple categories, and Tan-Link’s filtering allows us to create specific lists of client data quickly,” Williams says. “When we are running promotions, we’ll target market the clients that purchased a $10 spray tan over the last 30 days. I might run a three-pack spray tan promo and end a text blast to those customers specifically because it’s a deal they can’t refuse. I can target market my ‘bargain’ shoppers with promos while still capitalizing on full price sales inside the salon.”
To lock in more recurring revenue, analyze the appropriate reports to tell you how much new memberships and membership upgrades are worth in the long run and consider what you can afford to offer to achieve these results. When you look at the big picture, the long-term value of those conversions probably justifies getting more aggressive with one-time sign-up or upgrade incentives like a free bottle of lotion, free first month with commitment or “bonus bucks” they can use to buy additional upgrades or products.
“For tanning salons using a tiered membership model, one way is to segment and entice members on the lower level plan to upgrade into the higher membership plan for more value. Also, members who just purchased single sessions or just a package can be segmented and targeted to promote the membership benefits and upsells available only to that segment of customers. The messaging is also more personal, 1-1 than a mass marketing campaign,” Toston says.
For all of your marketing efforts, analyzing the results of your campaigns and adjusting accordingly is the most important factor for long-term success. Most salons report utilizing primarily digital marketing options today, and that’s great for this conversation because those efforts are easiest to track. If you’re paying to promote ads on Facebook, Instagram and Google, you receive detailed analytics that tell you everything you need to know, including how many views, clicks and other interactions you generated. Then, you just need to follow through on the back end and track how many times each ad produced the desired result in the salon.
“Analytics provide the data necessary for running promotions. Prior to running any type of promotion, I research the history of the salon in the reports to see how our previous promos have gone. Did they sell well? Did the customer see the value in the promo? Did it retain the customer longer? Did the customer ultimately spend more than they would have without the promo?” Williams says.
Your salon software also makes it easy to track redemptions of product or service offers you promoted.
“Besides tracking customers when their account is created and how they heard about the business, Tan-Link also allows coupon codes that can be used in the built-in online store. Those coupon codes are easily trackable to see how many were redeemed to evaluate the success of targeted marketing campaigns.” Toston says.
Since new customers always have to fill out forms on their first visit, it makes it natural and convenient to ask them how they heard about your business. Then, to really make use of that information, you have to consider not just that first sale, but how much you will make from that new client in the future. By looking at the amount the average customer spends per year, you will get the general picture. To get an even better estimate, track your new customers only for a year to see how much they spent. That number will be much lower than the average customer overall but will give you an accurate picture of whether your customer acquisition efforts are paying off.
As Crystal Billings, owner of Island Globe Tan told us: “We put it on our waiver how they found out about us. If they don’t fill it out, we ask. Every month we pull a list of new clients and how much they spent, and we track them for a year in order to get our final results, average value of a new client, client retention, and return on investment for our marketing dollars spent. What most businesses fail to realize is a new client isn’t just about that first time they come in; it’s the lifetime. We track that for a year so I can have an amount and make smart marketing decisions. I can take those numbers and allocate how much we made off each media source.”
Targeted marketing will make you more money right now, but you should also be using your extra time this summer and fall to consult the appropriate data and formulate your marketing plans for the future.
“The off-season is also the best time to plan your on-season marketing. Each season you should already be planning and constructing your marketing materials for the next season. It should be locked in and ready to go so you don’t have to think about it last minute,” Oakes says. “Think about every holiday, or local event that might draw customers and be ready to market for it. Even just a monthly marketing e-mail will go a long way.”
Price and Purchasing
Taking time to analyze your overall sales analytics and how you can adjust pricing and purchasing options to benefit both strong and weak points of your business is another vital consideration.
“There are over 100 reports any owner can run. There’s a lot to look at and analyze to determine whether I’m doing a good job as an owner. The most important ones for me are: memberships approved each month, memberships declined each month, new customers each month and their average spend rate on the first transaction, and average monthly product sales – how we compare to previous years and what is the total percentage of product sales compared to services. At a minimum, I try to keep product sales around 30 percent of our revenue. If I’m below that mark, then I look at running promotions and targeting clients that haven’t purchased in a while,” Williams says.
By keeping a close eye on his membership data, Williams was able to identify a new option that gave Fierce Tan a major boost in retention and overall membership numbers.
“While reporting and daily sales are an important thing to keep an eye on, looking at the bigger picture is where I have been able to capitalize for my salon. The last three years I’ve focused heavily on my customers’ average spend rate per year. I took it a step further last year and looked at our average membership spend rate. I noticed that our memberships weren’t active as many months each year as I had thought they were and that I wanted to figure out how to squeeze a few more dollars out of each one somehow,” Williams says.
“I structured our “flex plan” for just this – a membership that can’t be frozen but the tans rollover on the customers’ accounts if they aren’t used each month. Now, the customer has value on their account which is why they are less likely to cancel. The $25 price tag was structured around the customers’ average spend rate. While my average EFT transaction each month is over $25, I knew if I could get a customer on a flex plan, their yearly customer spend average was going to be higher than my previous year. The customer is ‘saving money’ by spending less per month, but in the long run, they are spending more per year on their tanning.”
Memberships are the most important factor for most tanning businesses today, but it’s certainly worth digging into every type of sale, including, sessions, packages and even upgrades. Those little add-on sales might add up to more than you think, and there’s a good chance that you could actually make more by selling more at a lower price.
“I always recommend taking a look at your upgrade pricing and really thinking it through. Sometimes the incremental upgrade pricing is just too broad. Think about the movie theater pricing system. For just $0.50 more you can upgrade to a large. I’m not suggesting you sell upgrades for fifty cents but don’t make the upgrades a large jump either. The data shows that more people will upgrade if the fee is nominal and you’ll end up profiting more in the long run,” Oakes says
Equipment and Products
Another way to identify your most valuable assets as well as areas where you need improvement is by looking at each segment of equipment or products, or even each one individually.
Starting with equipment, you need to know your revenue per room to make important investment and pricing decisions. Before making a major investment, first try to determine if any levels that are struggling could be fixed with adjustments to pricing, marketing or sales strategies. But, in today’s modern tanning market, many successful operators are making the vast majority of their money off their best equipment and most expensive memberships, they’re finding that their base level units are taking up more space than they’re worth and replacing them with premium tanning options.
“Tracking the revenue per bed/room allows you to see deeper in the numbers. Being able to see which beds/levels are bringing in the most revenue per session allows me to adjust what equipment will be swapped out next,” Williams says
“After 12 to 18 months of a decline, it’s probably safe to say that bed or service needs to be modified or adjusted in some way. I run these reports monthly to evaluate if there’s an equipment issue that needs to be modified. Sometimes, and more often than not, it’s a sales factor. I realize that we need to run different promotions or adjust pricing on a package a bit to make it more of an appealing offer. Either way, without the revenue per room reports, I wouldn’t be able to see into these numbers as deeply.”
Moving on to products, examine analytics based on price points as well as individual products. Also look side at the customer side: Segment your customers by how much they spend on individual products as well as product spending for the whole year and also look at preferences between demographics. But if you’re not happy with your product sales overall, the problem is most likely rooted in issues with marketing, sales approach or staff motivation.
“When it comes to lotion sales, we always aim to sell them the next step up from where they previously purchased. If you purchased a $80 lotion last week/year/month, our goal is to sell you a $90 lotion this time at a minimum,” Williams says. “Diversifying our product promos has been a huge key to increasing our customers’ average spend rate. Customers that don’t average high enough bottle purchases we target with multiple smaller offers: BOGO, half off, packet bundles, or bundles of lotion.
“I evaluate customers’ average spend per year rate, and their average transaction. Each quarter I update these numbers to see how the store is performing. If we are performing well and are above goal, my staff usually gets a hefty bonus. If they are underperforming, I have them focus on the basics: lotion facts, key selling points, and I might look at the promos we have been offering to see if I’ve ‘shot myself in the foot’ somehow so that I can make adjustments and not do the same thing again.
If you still feel like your underperforming with product sales and just can’t figure out why, keep digging. If your average profitability from product sales members, while considering any product discounts only members receive, is vastly greater than profitability from non-members, your problem is less about products and more about memberships. Focus on selling more memberships and your product sales will increase accordingly. You might even find that discounting memberships or adding incentives will not only lead to more membership, but the product sales you’ll gain alone will more than offset the associated costs.
“Tanning salons can quickly evaluate their pricing for product sales by simply looking at the sales volume and the net profit for each product. Product sales are typically a tiny percentage for salons if they are focusing on overall growth. As the main focus for salons should be on membership growth, and the products are just a tool to obtain more memberships and generate additional revenue at the same time,” Toston says.
Staff and Sales
You can also make an instant impact on the bottom line by improving your staff’s sales skills and success. Easier said than done, right? But you know from experience how much better some of your employees are at selling and how much of a difference there can be between the top and bottom performers. You’ll still have to identify the right ways to train and motivate them to succeed, but the first step is to understand if there’s something wrong with your overall approach so you can make pricing or purchasing option changes and communicate with your entire staff about strategic adjustments.
“Looking at just a sliver of data through occasional reports leads to an incomplete understanding of your business’s complete sales strategy and results in poor decision making. You cannot monitor a handful of numbers occasionally and expect to see lasting results. You must also see the numbers in the context of previous numbers for a proper comparison and trend,” Toston says.
Next, start to consider each employee individually. You surely have a good idea who’s performing well and who’s not but take a closer look to try to identify how you can help the stragglers. Coaching each staff members individually to improve their problem areas should be more effective than just conveying general sales techniques alone.
“One of the most commonly used analytics is the Lotions Per Person Average (PPA or LPPA) report. Essentially it will show you how your employees are performing from a sales standpoint that is fair. An employee who works 40 hours per week may sell more than an employee who works just 10 hours per week. But that doesn’t make them the better salesperson. This report will show you how much the employee sales per opportunity. This is a much more accurate way to determine the quality and effort an employee is providing,” Oakes says.
If your employees aren’t steadily improving over time, something needs to change, and the same goes for your business as a whole. If you’re struggling to find new ideas to keep getting better, start digging into the data and you might be surprised what you can learn and accomplish!