Tiered Pricing: How to Charge Different Rates in Your Salon (Without Team Drama)

If everyone in your salon charges the same price, the junior who's only just qualified, the senior who's been with you for 10 years, you are leaving money on the table. In fact, I would go as far as to say, if there is more than one person working in your business, tiered pricing can fix your problems. Let me show you why this works, and how to implement it. Hello, hello, hello, my salon friends. Phil Jackson here, your queen of salons, coming all over the airwaves in another dose of Wise Owl Wisdom. How on earth are you? Achingly well, I hope, as we get the last episode of January under our belts. How's it been for you? Bumpy ride, I think, for lots of salons this month. Lots of people moaning in the industry groups that they haven't been busy enough, hopefully. You've been taking it in your stride a little bit. Hopefully, you've got some retainer income in there. You know I'm a big fan of that recurring income. And hopefully, you're facing a fully booked February. Now, February was always the tricky one for me. So, brace yourselves. All it takes is a little snowstorm, and suddenly we're looking at big chunks of white space. So, in the meantime, of course, it means that we need to maximise our profits and get as much money through the till profitably as we possibly can. And one of the tools that I think you should be looking at is tiered pricing, which means that different team members charge different prices based on their experience, their expertise, and most of all, on their client demand. So, for example, we see this a lot in hair, where you might have a junior stylist who's just qualified or got a year or two under their belt charging a certain amount for a cut and blow dry, and then a senior stylist who's a bit more established and got a few more years charging noticeably more. Same service, different prices, and that's based on experience and demand. But beauty salons don't do this anywhere near enough. Usually, I'm going to put my neck on the line and say that you beauty guys have normally got us beaten as far as business systems are concerned, but this is one where the hairdressers are far, far further ahead. And if you're in beauty and not doing tiered pricing, you are missing out. So why would that be? Well, reason number one is that without tiered pricing, let's say you've got a junior therapist who's newly qualified with a little clientele, and then you've got a little clientele, and then you've got a little clientele, and then you've got a senior therapist who's been with you for years, fully booked, charging the same price.

Here's what happens. When you take a booking at reception, you have a subconscious bias because you understand that your senior therapist is more expensive to the business because of the higher wage. So we need to keep that person busy. Let's book her. And that means that your junior has less of a chance to build regulars because you're steering clients, quite rightly, towards the senior. Whereas with tiered pricing, we're giving the junior a bit more of a chance because those price-sensitive clients gravitate towards the junior. Junior gets clients, builds experience, grows their column. It levels the playing field. Reason number two, it's fair to your senior team. There is unfairness in that flat pricing. Someone who's been with you a year or so and charges the same as someone who's been with you for 10 years, with the same title, the same price, they're completely different in their contribution to your business, and it's not fair. If you've got years of experience and higher client demand, shouldn't your prices reflect that? Shouldn't your title reflect that? It shows your team that there's a career path in your salon, not just a job. And if you don't take care of, listen to me ranting again, if you don't take care of your team's future, if you don't show them they have a career path with you, they will take care of that career path themselves. And normally that means leaving or going self-employed. Reason number three, lots of us are in love with cost-based pricing, even though it's my least favourite model of pricing. But on a cost-based pricing model, it makes sense. Your senior team costs you more. That means that if they're both charging the same, you're making more profit from one and less profit from another, which is backwards. With tiered pricing, we're appreciating that we have different cost basis and the numbers add up. The profit per service stays consistent regardless of who does it. Now, I said at the top of the programme that if you've got more than one person in your business, you should have tiered pricing. So let's price in your cost. Even if you decide that you don't want tiered pricing for the rest of your team, have an owner tier that prices in the time that you spend on marketing and admin. Who knows? Maybe that means you don't have to take as much work home in the evenings or do your marketing while you're watching traitors.

Reason number four, it gives you much more control over who does what in your business. Now, I consulted with a beauty salon up in Scotland and she had some very highly qualified therapists on very, well, relatively high wages, certainly for the time. And most of them were earning between £18 and £25 an hour. This was going back a few years as well. And then they were being booked out to do quick brow waxes for £10 or £12 because the booking system would allow that. Now, if you've got tiered pricing, it makes it much easier for you to exclude those cheaper services from your expert tier. Those quick brow waxes can only be booked with a therapist or a junior therapist. The expert tier is reserved for those higher value services. Now, the numbers work. You control who does what based on profitability, not just availability. And reason number five is that tiered pricing is a retention tool. So what happens in January? In January, clients start looking at their spending and some of them get a little bit price sensitive, particularly if you've chosen January to increase your prices. So they either stay and complain or they leave the business entirely and you lose the client. With tiered pricing, you have an argument. You can say, I know money is tight right now. Instead of leaving the business, why don't you go down to our junior tier instead? You're still going to get the same great service, but it's £45 instead of £55. You keep the client in the business. They're still with you. They're still spending just a slightly lower tier. And who knows, maybe if their finances improve, they can move back up as well. You might get a few objections when you float this with your team. Maybe your team will be offended by being called a junior. Well, that's fine. Just get creative. Work with them. Don't use the word junior if it bothers them. We didn't have junior stylists in my salon. We have graduate stylists, which I think sounds like they are accomplished. At least they are qualified. So the language is flexible, but the concept of tiered pricing is not. Objection number two. Maybe your clients will think that their junior team isn't as good. Well, that's kind of the point. What we want them to appreciate is that your expert with years and years and years of experience is going to give them a more consistent or a better result. Different experience levels deserve a different pricing.

It's not insulting. It's an accurate reflection of what's going on with your team. Objection number three. What if clients complain about price differences? Honestly, they don't. OK, this is a fear that's maybe in your mind, but they won't complain about tiered pricing. They understand that different experience levels mean that we have different prices available. I like to think of it as the same as when you book a flight, when you book on to, let's say, British Airways flight for your holiday, you have a choice of seat. You can choose economy. You can have economy with a bit more legroom. You can have premium economy. You can go business. Maybe if you're going transatlantic, you can go first class. We're all going to the same destination. We're all on the same flight, but we just have a slightly different experience. And that's reflected in the prices that we pay as well. Objection number four. What if your seniors worry that their clients will leave? Well, they need to lose a few, to be honest with you, because that opens up space in their column for more premium priced customers. We don't want their columns being clogged with price sensitive, low value customers. The idea is that some of those customers are passed down the tiers. And objection number five. Will this create team conflict? No, it won't. In fact, I think most people will appreciate that it's a really good idea for their future, but only if you make it transparent how people need to, the measures that they need to hit in order to move from one tier to the next. So we've got nice measurable criteria. So once you've defined your tiers, you need to set out how people move from one tier to the next. It's not just time served. In my salon, it was all based on client retention and utilisation. If you're really, really busy, if you're packed out, you're going to get moved up. I don't care whether you've been with me two years or 20. If you're not busy, you're not going to get that promotion. And maybe you want to build in some training targets. Maybe there's some certain advanced training that those stylists or therapists need to complete so that they can carry out those higher tier services. Maybe you want to build in some measures around positive client feedback and reviews as well.

So there we have it. Tiered pricing helps your juniors, rewards your seniors. My gosh, that makes it sound ancient, doesn't it? And it fixes your cost-based pricing, gives you control over who does what, and helps keep people in your business during a downturn. My goodness, I can't think of a downside. Can you? If you need help getting your pricing and profit margins right, head over to getpaidproperly.com. That's my program specifically for salon owners just like you to help with pricing and profitability. If you want my one-to-one help, my link is in the show notes below. What have I missed? Why not reach out and let me know? My email address scrolling at the bottom of the screen right now, phil at buildyoursalon.com. I would love to be hearing from my salon owner friends anyway. Just a few short days until I'm coming all over the internet with another dose of my Wise Hour wisdom. And until then, take care.