Tiered Pricing: Where Supply Meets Demand

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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With each promotion Premier sends a letter to that technician’s regular clientele congratulating her on her promotion. Technicians also give their clients 30 days’ notice at appointments. Technicians never lose more than 10% of their clients (and rarely even that), while their dollar volume remains the same or higher. By the same token, those clients who do switch almost always stay with the salon.

Nail technicians are reviewed quarterly, at which time they receive coaching on how to reach both the next commission level as well as the next price level. While some full-service salons argue against tiered pricing for nail techs, saying that nails don’t require the expertise of hair, Drewno responds that you can place a value on technical expertise and a client’s comfort level. “Our Designer Nail Tech is very proficient and methodical and she stays current on her training,” she says. “But clients really are paying more because she’s in demand. Clients know they’ll get in and out without any glitches.”

 

Start at the Bottom, Work Your Way Up

The proof of multi-level pricing lays in staff retention for Sherri Williams, managing nail director at Mitchell’s Salon & Spa, a Cincinnati-based chain of four salons. With 46 nail technicians to manage, she’s happy that technicians tend to stay the course because it means she can focus on growing the department rather than trying to keep up with demand with a short staff.

At Mitchell’s, all technicians begin at the lowest of the four levels (Nail Technician, Master Nail Technician, Nail Director, and Artistic Nail Director) regardless of experience and client following, Williams says. “We have a strict training program that everyone goes through,” she explains. “Once they’re done they start as a Nail Technician. Most don’t have a problem with that because our prices are usually higher than what they were charging before, and if they excel they can move up in as little as four months.”

To aid them in meeting that goal, Williams mails the new tech’s former clients a letter, inviting them to try the salon at a discount. “We think that once we get them in to see the salon and our superior service and ambiance, they’ll think it’s worth it,” she notes.

 

Nail Technicians are reviewed quarterly based on set criteria that address client retention, weekly sales averages, retail sales percentages, personality, customer service skills, and professionalism. When a Nail Technician is promoted, Williams makes a sign for her station that says, “Congratulations! _________ has achieved excellence and has been promoted to Master Nail Technician.” “That gives clients a month to get accustomed to it and to decide whether to stay with her or move to someone else,” Williams says. “Most clients think they deserve it.” The clients who do switch, she notes, would not have remained loyal anyway.

Mitchell’s technicians spend a year on average at the first level, but the move from Master to Director can take a few years or more. “If we didn’t make the criteria tough then everyone would be promoted,” Williams says.

By the time a Technician reaches the fourth level, Williams says the expectations are high, beginning with 90% client retention. Of the chains’ 46 technicians, only four are at the top level. “We just added the top level a few years ago because we had a few whom had been here over 10 years and who were doing incredible volume,” she explains. “They had nowhere else to go and they were losing motivation because they didn’t have the opportunity to grow their income or their job description.” Williams happily notes that she has 17 technicians at the third level who are working their way to the top.

“Our Directors are expected to do more,” she notes, “They become mentors for our new technicians, they help organize cleaning and stocking schedules, and we have separate meetings where they work with me on developing new ideas. They become more involved in management.” Alternatively, these top Technicians also have more say, more freedom, and more rights because, in Williams’ opinion, they’ve earned it.

Williams admits that clients sometimes do become confused by the different prices, but adds that it occurs usually when someone calls for a price quote. Receptionists explain that prices vary according to level, and that the levels are determined by the person’s time with the company and excellence in technical expertise. By the same token, first-level Nail Technicians take priority with new appointments. “If someone doesn’t specify a specific person or level, we put them with a Nail Technician to help her build her clientele.”

 

You Get What You Pay For

From Sherri Evans’ perspective, clients want exactly that. For some, it’s worth every penny for a fast, high-quality service, while others are willing to compromise a little on time for a value price. “I felt it was unfair both to client; and seasoned technicians to charge the same amount for nails with someone just out of school as for someone with several years’ experience,” explain Evans, the owner of Get Nailed in Yuma, Ariz. While quick to note that there’s just her and one other technician in her salon right now, at one point she had five technicians of varying experience. In hiring, she tested each person’s technical abilities and would then critique their work, pointing out where and how they could improve. “When they made these improvements in their technique and increased their speed, they could raise their prices. From my point of view, I put up with a lot fewer complaints. Otherwise a client would come in one time and get an OK service from one technician, and then another time would get a great service from someone more experienced.” In her opinion, clients were well-justified to question the prices.

“Clients liked the tiered prices because when they called the receptionist would explain the prices and what they were based on,” she says, adding that basic manicures ranged from $8 to $14, while fills were $18-$25. “And it gave technicians a reason to improve their skills.” In addition to the multi-level pricing, Evans had a multi-level commission structure based on breakpoints. Up to the first break all technicians made the same commission; on dollars earned over that first break point Evans paid a higher commission. With several built-in break points, technicians had the chance to continually increase their income in addition to price increases.

Evans advises salon owners considering a similar structure to start everyone at the same level and to develop specific criteria to move up. “Set reasonable challenges with your goals and for how long they have to maintain those levels to move up in price,” she advises. “If you have a more experienced staff, you might start with two levels and then create a lower level when you hire someone with less experience,” she says. On the other hand, if your staff has a wide range of experience (for example, Evans had everything from someone fresh out of school to her own 14 years of experience), she recommends considering as many as four different levels.

A Competitive Edge

Sharon Bisoni, owner of Elegant Hands in Rochester, N.Y., first adopted tiered pricing to help her newest staff members who were straight out of school. “I had them charge a reduced price so that clients who were price shopping ended up with them and they would gain experience,” she explains. Clients retain the assurance of a guaranteed service, but Bisoni notes that the lower prices take the pressure off of new technicians because clients know what to expect.

Bisoni notifies clients who ask about prices of the “special” the newest technician is offering to build her clientele. “This also keeps a lot of business from going to the discount salons,” she notes. “We had one technician start seven months ago and she’s booked solid almost all of the time.” Of course, Bisoni is quick to add that: there are other factors besides price involved, and as she operates a booth rental salon there is only so much she can do.

Once the technician’s book begins to fill, Bisoni encourages her to raise her prices $2, which few clients find offensive. “They rarely lose even one client because now they’ve built a rapport,” she notes. “And I point out to them that even if they lost as much as 10% of their clients the price increase makes up for the loss and opens them up for new business at a higher price.” Like others, Bisoni also believes those clients who leave over $2 wouldn’t have stayed much longer anyway.

“I think tiered pricing helps cut down on complaints from clients and it helps keep the technicians interested in nails,” she says. “I think we’re losing so many technicians because they become frustrated in trying to build a clientele while meeting everyone’s high expectations.” A lower initial price, she says, benefits the client while relieving some of the pressure from the nail technician, who doesn’t feel as pressured to do the service in the same amount of time as her veteran peers.