Let’s face it: Increasing service prices is a necessary evil of being in the spa business. Stan Grod, owner of Massage Masters in Sherman Oaks, California, lists the most important reasons for raising your prices: You need to make a profit; you must be able to pay your staff the going market rates; and you have to keep up with inflation and other businesses, so you don’t devalue your offerings.
As a spa owner or manager, you simply can’t afford to shy away from this inevitable issue, but you can minimize backlash and appease disgruntled clientele. There are a plethora of proven ways to ease into this much-needed transition, both for spa pros and their clientele.
The Magic Number
Price increases should be considered well in advance of their implementation. Before planning price jumps, Grod researches the market: Has the minimum wage changed? What’s the competition charging? If other businesses are upping their prices or minimum wage is on the rise, he says it’s time for him to raise his prices as well.
Grod plans increases for a year or more out, and the amount is usually small—about $3 or $5 per service, and lower for less expensive ones. He also prefers to keep prices at odd numbers. “I would rather price a treatment at $79 than $80,” he explains, his logic being that round numbers can “look” more expensive.
New prices for services can be rolled out pretty easily, as customers tend to be aware of inflation and rising prices across the board. Lisa Starr, senior consultant at Wynne Business in Swarthmore, Pennsylvania, says it’s a good strategy to raise prices on a portion of services first, then focus on the rest later in the year. “Get your clients accustomed to the fact that costs go up now and then, and it won’t be a big issue,” she advises.
Price hikes should generally be spread out, which requires advance planning. For example, Grod anticipates increased prices in fall 2018—and aims to wait until January 2020 for more. Raises at the start of the year make sense to both his business and his customers, he says, because people typically view this as a time for new beginnings.
Jarred Fajerski, vice president of operations for Trevose, Pennsylvania-based chain Hand & Stone, says that pricing changes are implemented on a store-by-store basis (there are 326 across the country), although sometimes a group of franchisees in one area will band together to request that prices go up. All increases have to be vetted by the head office, and typically they’re raised by $10 for new customers’ monthly dues, nonmember pricing and introductory offers.
Hand & Stone locations tend to increase the costs of all services in one fell swoop. “We don’t see much difference in bookings between spas that added $5 or $10 to charges, so you may as well go with $10,” adds Fajerski. But you shouldn’t do it too often either; if you “condition customers to expect regular price increases,” he warns, it might put them off.
Starr advises raising prices a maximum of 7 to 10 percent. She also suggests implementing these changes for a few top-selling services and leaving less popular ones alone. “Consider the 80/20 rule: 80 percent of your income comes from 20 percent of your services,” she says. “Focus on treatments that will create the most impact to your bottom line.”
Dealing With Backlash
Unsurprisingly, the main concern with raising your prices is disgruntled clients. Realistically though, they do expect increases and typically understand, says Grod.
To soften the blow, he gives them a month’s notice. He also offers guests opportunities to buy services and memberships in advance—at the old price points—which raises sales by about 10 percent. Once the new prices kick in, he reports a 3 percent decrease, but it only lasts a month or two, “until people realize it’s not out of line.” This decrease is so small and so temporary that Grod says he doesn’t need to take any action.
An alternative to raising prices is to reduce the length of services, e.g., from 60 minutes to 50, suggests Starr. “That in effect is a price hike, but the client doesn’t have to pay more. And this allows employees to turn the room on the hour,” she explains. Another option, says Starr, is to offer add-ons or samples. The latter carries an extra bonus: more retail sales down the road.
Hand & Stone franchises like to give clients incentives when prices go up. “Sometimes they add a $5 coupon for an enhancement, which can get customers hooked on something new—and more expensive,” says Fajerski. One thing the chain won’t do? Increase membership prices for existing members— price hikes are for new additions only.
Grod, on the other hand, prefers not to throw in extras. “I don’t want to devalue our offerings,” he says.
Getting the Word Out
Price hikes can’t come out of the blue, however, no matter how much you think your customers might expect them.
Grod notifies clients about upcoming price increases via store signage and emails. He keeps it brief, because they generally understand why, he says. Fajerski reports that Hand & Stone franchises mostly communicate via email, and they too keep it short or members won’t read it.
Don’t make a big deal of price jumps, recommends Starr. “A small note at the front desk, in a nice frame, is plenty,” she says. “If prices are raised incrementally now and then on a handful of services, it won’t require a whole campaign.” Be sure to phrase it in a positive light as well. Starr suggests something like, “We’ve increased our prices so we can continue to provide you with the great service you expect from us.”
However, cautions Fajerski, avoid being the first in your neighborhood to raise prices. “Follow the competitive landscape. You don’t want to be perceived as the most expensive or the cheapest,” he advises. He prefers Hand & Stone locations to be seen for what they are: middle of the road with great services.
–by Amanda Baltazar