Money Matters

Tiered Pricing: Where Supply Meets Demand

Is multi-level pricing a solution for keeping the best nail technicians satisfied and motivated in their jobs? Some salons say yes, indeed.

Multi-level service pricing in salons takes the macro-economic concept of supply and demand down to the most personal level: The technicians in demand can command a premium price compared to newer or less experienced or even less motivated peers.

 “I think tiered prices allow individuals to excel, and the system doesn’t hold everyone in the salon to the lowest common denominator, says Carol Shanks, a salon consultant in Denver. “In an industry that’s having a difficult time attracting labor, the salon owner has to allow the ability to excel for those who want to and are able to. By the same token, it’s an injustice to make the low producers charge what the highest producers do.”

Phil Fennell, president of Programs in Salon Excellence based in Milton, Fla., has mixed emotions on multi-level pricing, saying that it definitely creates an individual incentive and that he’s sent it work well in many salons. “But on the flip side, if you want a team-oriented environment, some people might argue that if a salon as a team says we maintain a specific minimal level in quality, why would you allow different prices?” he asks.

Fennell balances the two views by urging salon owners to ensure tiered prices fit their overall environment and objectives. “The programs I’m teaching right now include a module called “Culture Alignment.” There are three cultures I see: the first one being true team based, second employee-based but not a team, and third being booth rental. I’ve seen them all work very well and I’ve seen all fail.”

In short, he says, a salon owner shouldn’t adopt tiered pricing just to benefit the salon’s or the employee’s bottom line: The program should be weighed carefully as part of the salon’s overall culture and should be designed to work toward the salon owner’s overall business goals.

NAILS talked to five salons ranging from high-end full-service to mid-level nails-only that have adopted multi-level pricing to find out why they did it and how it’s worked. Here, owners and managers explain both the ins and outs of their systems as well as the impact they’ve seen it have on their business, their technicians, and their clients.

Always Something to Strive For

Spectrums Of... Salon Spa in Burnsville, Minn., initially implemented tiered pricing only in its hair department, but about six years ago the owners decided to implement a similar program in the nail department in recognition of the fact that different levels of experience did indeed result in different service times and qualities. With nail technician director Jane Haapala Rees’ help, they devised a three-tiered system (Nail Technician Associate, Artistic Nail Designer, and Master Nail Designer) based on industry experience, percentage booked, and product knowledge.

“People are usually at the first level for less than a year,” Haapala Rees says. “But they usually stay at the second level for quite a while because we had to make the third level something to continuously reach for. To get to Master Nail Designer, you have to meet a specific dollar volume per week and have a 95% booked rate. You also have to have complete knowledge of all services and products and be able to teach other technicians as well as perform them yourselves.”

Within each level the prices vary somewhat so that technicians always have a new goal to strive toward. For example, fills with a Nail Technician are $26-$27, while the same service with an Artistic Nail Designer ranges from $28-$32. Haapala Rees conducts a review with each technician quarterly to help her monitor her progress and set new goals.

When placing a new employee, Haapala Rees takes into account her years of experience and conducts technical interviews. She also considers whether the applicant already has a following. “If you have a pretty full book when you start we can place you into the second level,” she says by way of example. “If you have experience and a good technical interview but no clientele, we have different prices within each level so we may start you at a higher price in the lower level.”

To determine the different prices, the owners first calculated the overall cost of running the salon and then assigned a specific cost to each station by figuring out the number of bookable hours there are per station each week and the average ticket per station for each department. From there, the owners calculated the bottom line each station had to generate per hour. “Thai’s how we came up with the lowest prices and from there we figured out the next best levels for pricing based on people’s experiences and services, etc.,” Haapala Rees notes.

Haapala Rees feels the system helps Spectrums Of ... retain nail technicians in a competitive market because there’s always a new goal to work toward. As for clients, the front desk tries to simplify it as much as possible. “If a client asks about prices they’ll explain it, but we start off by asking when is a good time for them to come and figuring out what we can offer them at that time,” she says. “You’d be surprised, though, by how many people call asking for someone with experience.”

In Haapala Rees’ opinion, the system would work in any salon, depending less on whether a salon is discount or high-end than on the support the salon offers. “It all depends on how much training you provide, the product knowledge you offer, and the opportunities you create,” she asserts. “It just takes working out the numbers and inspiring your technicians to build their books and train.”

If They Can’t Move Up, They Move Out

That pretty much sums up Denise Drewno’s appreciation of multi-level pricing. “We used to start people at a base and then they’d work up to the highest commission level we had,” she says. “It got to the point that when people reached that top level they’d quit. We decided that if you have a full book you should be able to raise your prices and get a 10%-15% increase in volume.”

Like Spectrums Of, Premier Salons has three different price levels. To get to the second level, technicians need a minimum request rate of 75%; for the top level they need 90%. Premier chose to integrate the different levels with its previous system of tiered commissions based on volume so technicians would have two different ways to grow their income. “When they reach our fourth commission level of 50%, they move up to Master Nail Tech,” explains Drewno, vice president of salon operations for the chain’s Detroit metro area. “That allows them to achieve a larger volume and puts them well on their way to the next commission level. We’re trying to make our pay plan competitive enough so that their pay or price level changes every six months.

“To keep someone, you have to let them grow,” she continues. “It usually takes someone two years to move up to Master Nail Technician.” To qualify, nail technicians have to meet the criteria of their current pay level, be current with their training, be a team player, and have their manager’s endorsement. And, of course, it ties in with their request rate.

For simplicity’s sake, new customers are charged the salon’s base price regardless of their level. “For example, if you want a nail repaired and I put you in with Christine, a master nail tech, she will explain at the end of the service that she has charged you the salon’s base price and that she’d love to see you again but that her prices are higher,” Drewno says.

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