Discounting without the headaches

This is the Build Your Salon podcast with me, Phil Jackson, here to help salon owners master the skills you need to build bigger profits and a fuller life. Hello, Phil Jackson here from Build Your Salon, here to help you master the tools you need so that you can generate the profits you deserve and lead a fuller life. And today we're talking all about discounting. And discounting is the subject that gets me the most angry emails. Every time I talk about discounting I get a small flurry of negativity because there are lots of salon coaches, and in fact salon owners and managers, who believe that you should never discount your services. I think they're wrong, I think there are occasions that it can work really well, and that's what I'd like to talk to you about today. So if you feel that you're getting your discounting wrong, or you think that discounting could benefit your business in the long term, then please keep listening. Because trust me, I have got it hideously wrong in the past. And in fact, there were times in my salon when it felt that we may as well throw all the price cards away, because there were so many people coming in on different discounts that nobody was paying the same as the next person. And in fact, it felt that nobody at all was paying full price. So I have taken it to the extreme and got it wrong. Now I think I've got some really useful stuff that I can share with you. And the key to discounting is to make sure that you're not creating an unrealistic expectation in the customer's mind for the future. So what that means is that you can discount today, and I'm going to go through four times that I think that you can do it really successfully. But what you mustn't do is create an expectation of discount every time. That's going to hurt your profitability really badly, and actually lead to quite a lot of disappointment in your customers as well. So the first way that I think we can discount really successfully is if we can separate the discounting from our business. And there is a whole industry that has built up around us to help us do that. So basically, instead of discounting through your own website and through your own promotions, you bring in another company that does that discounting for you. So we've got companies like Groupon that can discount very successfully for us. And again, it goes back to that expectation that we're building in the customer's minds. Because if you run something like a Groupon offer, which is only valid for new customers, you can give them an 80% discount. Okay, you're not making money on that first visit, but if you don't understand the lifetime value of your customers, you need to go back to one of my previous blogs and have a look at that.

But what we can do is offer that huge discount because she's not expecting that discount every time. She understands that it's only while she's got a valid Groupon voucher in her hand. So we can successfully discount if you can separate the discounting away from your business. The second occasion that I think you can really successfully discount in your business is when you are marketing to lost customers. And that's because I believe in something called the price experience match. What the price experience match means is that most customers who stop coming back to you, as repeats, don't change that behaviour because you've got something hideously, horribly wrong. Usually, it's because they were relatively happy, but the price they were paying no longer matched the experience they were receiving. Either because they were kept waiting too long at reception, or nobody answered the phone the first two times that they were calling, or the cup of coffee that they received was slightly lukewarm. So it's nothing usually to do with you doing a bad job of their service, it's just that the experience wasn't quite worth what they were paying. So what we can do is discount to a level either at or below their expectation, and hopefully tempt them back into the salon, impress them with an amazing experience, and hopefully change that buyer behaviour back to current customer repeat behaviour. And that brings me on to the third instance when discounting is justified, and that's when you're trying to alter buyer behaviour. So a really good example of this is say, rebooking. So for a lot of years in my salon, we offered a rebooking discount. Because as salon owners, we understand that if people book as they leave, they tend to be back in sooner than the people that pick up their phone when they're ready for their next service. Extra services during a year means increased profitability for the salon. So we swapped a discount in exchange for that change in buyer behaviour. And the rule of thumb here is that the bigger the change in behaviour that you're expecting, the bigger the discount's going to have to be. So for example... So for something quite small, like asking people to rebook as they leave, you can probably get away with a $5 discount or 10% off their next service. If you're trying to change someone's entire buyer behaviour, so you're trying to poach a client from another salon, you're probably going to need a much bigger discount. Now, there are times when it's justifiable to go negative, and if you're not clear about that, then have a look at the blog that I did a couple of weeks ago on lifetime value of your customer.

And I don't necessarily agree with discounting on new customer services, but if it's something you want to do, it's going to have to be a really juicy discount to get that change in behaviour. And the final time I think you can discount is when you are rewarding customer loyalty. Again, you're not building an expectation of that discount on every visit because your customer will understand that she's only getting the discount because you're rewarding her for, say, six full-price visits or nine full-price visits in the past. So my message to you is that you can discount successfully. Keep in mind the future expectation, so keep in mind what your customer is going to expect on her next visit. If you have a really successful discounting promotion, please get in touch with me. I love hearing about how well you salon owners are doing. So send me an email, phil at buildyoursalon.uk. Otherwise, I'll see you next week. Hey everyone, it's Phil. Did you like the episode? Be sure to subscribe and tell your friends. For more help in getting more from your salon and your life, head over to buildyoursalon.uk. Enter your name and email for our newsletter list. In the meantime, keep on building.