32. Do you need Salon Memberships?

Hi everyone, this is the weekly Build Your Salon podcast with me, Phil Jackson. I'm here with the tools you need to generate the profits you deserve so that you can lead a fuller life. Hello and welcome. Today we're talking about salon memberships and this is a subject that's very dear to my heart because it's something I've kind of become known for in the industry over the last two to three years. And I've won awards for the membership scheme that I run in my own salon here in the south of England and it's something that I think there could be an element of in everybody's business. If you've ever struggled with cash flow in your salon, if you've ever struggled to stand out from your competition locally, I think memberships could be really, really helpful for you. I've seen some salons that have taken it to an extreme and they have 70 to 80% of their income coming through memberships. In my own salon, we fluctuate between about 23 and 25% of our income. And that means 25% of our income is on retained income. So it's predictable monthly income coming straight into the salon on the first of the month. And I'll tell you what, as a salon owner, it feels fantastic to think that all of my fixed costs, my rent, my rates, my lighting are all paid on the first of the month before we've even unlocked the door. Sounds good, doesn't it? But I have got things horribly, horribly wrong. We're in our third year of running memberships at Bravo Hairdressing. And in year one, we got things drastically wrong. Year two, we managed to get most things right. And in year three, I think we finally nailed it. So what I've got for you today is five pointers to set you on the right track. And the first one is the one I get the most questions about, and that is pricing. Now, I can't tell you what you should be charging for your membership packages. What I can tell you, though, is that from the customer's point of view, there needs to be a financial incentive. There needs to be a financial reason why they should be signing up and giving you predictable income for the next 12 months. So they're going to need some kind of discount. It needs to make financial sense for them to make that commitment. But the reason I'm bringing this up, because that's a very obvious point, the reason I'm bringing this up is that it doesn't need to be as big a discount as you think. There is a certain amount of value that you can build in by making it feel like a club, making it feel like something slightly more exclusive that has value to it.

So you don't need to discount quite as much. The other thing is there is a small element of your clientele, if it's anything like mine, that will pay because it's a predictable stream for them. So if you've got, for example, a hair salon where most of your customers are coming in between five, six or seven weeks, that puts spikes and troughs in the amount that they're spending in the salon. By putting them onto a membership, that spend becomes predictable and customers like that. It's a lot easier for them to budget if they're on a predictable monthly outcome. Point number two is tiered plans. Now, if you only have one level of membership in your salon, if you're only offering membership in one form, I'm afraid you have kind of missed the point. What you've got is a really limited range, which is appealing to a small amount of your clientele. It makes absolute sense for you to offer different membership tiers. If you don't understand this, go way back when we first made friends. Episode 11 was all about how we can add a premium. It's still true that 20% of your customers will buy a premium version of your product or service if you make it available to them. And it makes good sense value wise. So make sure that when you're doing your memberships, you have more than one tier to offer them. Point number three, keep it simple, really simple. Now, we got this really wrong at Bravo the first year. If you signed up for one of our packages, then you were allowed a certain number of haircuts per year and four hair colours per year and a couple of retail products on each visit. It was a nightmare to monitor. You have to keep it achingly simple, not only for your customers, but also so that you can help your staff sell your memberships. So keep it really simple. And the simplest way to do it, I think, is to make your memberships unlimited. So if you sign up to one of the membership packages in my salon, you're entitled to, for example, as many haircuts as you like in a year. Yes, it can feel a little bit scary. Yes, to start with, people do slightly abuse the system, but it's a bit like a gym membership. When you first join a gym, you have the very best intentions in the world and you hit the gym at least once a day and you don't use your own shower at home for nearly three weeks. But after a couple of months, you start to find a pace and a rhythm with your spend and a pace and a rhythm with your frequency of visit. And it's exactly the same on salon memberships. Things will settle down over the first couple of months. And at the end of the day, how many haircuts do you need? If your hair hasn't grown, it's going to get shorter and shorter and shorter. Don't be afraid. Keep it simple. Point number four, leave room for upsells.

Now, I got this really wrong in year one. What we had on our very premium version, so on the very top tier of our membership, you were allowed as many haircuts as you wanted, as many hair colours as you wanted, as many in salon conditioning treatments as you wanted, and as many free retail products as you wanted. And it was fantastic. The customers loved it. And they were paying a heck of an amount every month for it as well. So I was really happy on the cash flow side. The problem was, if you're a salon owner worth your salt, you will have targets in your salon. And if you've got targets, one of those targets may well be on upsell. So I target my team on the amount of upsell they're doing every month. The problem was, if you were coming in on my premium range on my memberships, then there was nothing left to sell you. So what we did was scaled back a little bit, took out a couple of those elements, so there's still room to upsell and still room to maximise profitability. And my final point today, allow cancellations. It's really tempting to sign people up in an ironclad contract and make sure that they're paying you this retained income for the next 12 months. There are two problems here. Firstly, it's a tougher sell. You have to find a way that the customer can get out of that contract because then it's a no-brainer. If I can say to you as a customer, sign up to this, it gives you predictable outgoings for the next 12 months. But if you don't like it after six, we can get you out of the contract. It's a lot easier for me to sell it to you. Also, and you need to check your regulations locally, here in the UK, if you don't allow people cancellations, the contract changes in nature and it becomes a contract of credit. There's a lot more stuff, there's a lot more regulation around credit contracts than there are membership contracts. So make sure it's an ability for your customer to get out of the contract if they really need to. And apart from anything, it's not good PR for you to lock someone into a contract that they're not happy with. I hope that's been useful to you. Throw your comments below if you've got any questions. If you haven't subscribed already, please hit subscribe now. I do a video like this every single Monday and I would hate you to miss out on the fantastic content that I'm sharing. If you've already subscribed, I will see you again next week. Take care. Hey everyone, it's Phil again. I hope you enjoyed the episode. If you did, please subscribe and be sure to tell your friends.

For more help and information on running your salon and your life, head over to buildyoursalon.com. I'll see you there.