Money Matters

Can You Afford (Not) to Raise Your Prices?

With services  prices flat for the sixth straight year, salon owners hesitate to raise their prices, even in the face of the rising costs of doing business. Are you sure it's clients' unwillingness, and not fear, that's holding your prices down?

<p>Illustration/Chris Murphy</p>

In 1990, Maggie Boyd was on the verge of quitting the nail industry. She loved doing nails and made good money, but there was no time to enjoy the rest of her life because she worked 12 hour days, six days a week. She decided to cut her hours by hall so she could explore other career opportunities. At the same time, she raised her service prices $5 across the board, figuring she didn’t have anything to lose because she was ready to give up the career anyway. If she’d known what she had to gain, she says, she would have made the move years earlier. “It never really hit me until I was preparing my taxes that year, but my income had increased 10%, even though I was working half the hours,” says Boyd.

At a class she recently taught on pricing nail services Boyd told that story and attendees expressed envy that she made such a daring move, much less that it was so successful. They understood her cutting her hours, hut were in awe that she was able to raise her prices so much. Boyd’s response: Anyone — at least anyone with a full appointment book — can do it.

“You have a full book and work 12 hours a day, five days a week, and you’re telling me you can’t raise your prices?” questions Boyd, incredulously. “Anyone turning clients away needs to raise her prices immediately. Sure, you might lose a few clients, but that’s good because you’ll make time for the clients who are willing to pay more.”

Since 1990, Boyd has proved her point time and time again, raising her service prices to their current level of $85 for a full set and $45 for a two-week fill. (Clients pay $5 more for every week they stretch the two-week fill, says Boyd.)

After the class attendees’ initial shock at her prices wore off they started digging for the real reason she could command the prices she does. And sure, Boyd admits, her salon is in an affluent Chicago suburb of just 9,000 people, and while discount salons have discovered the sleepy area, there are still only three or four in town competing for clients — so far. But Boyd s reaction to discount salons is anything but fearful: When the last one opened, she raised her fill prices $5. “Discount salons don’t offer the same kinds of services or the same quality of service that I do. They are not my competition,” she says flatly.

Boyd’s competitive advantage is not price, so she refuses to compete on that level. Instead, she captures and keeps clients with exclusive services — no one else in her area offers light-cured gels, which she markets as “natural nail enhancement technology” — and a “healthy” salon — evidenced by odorless products, a customized local exhaust ventilation system, and strict sanitation practices.

One nail technician challenged Boyd with “What you’re doing may work fine for you, but it won’t work in my area. My clients would never pay that much to have their nails done — they can’t afford it.”

Or can they?


The “Fear Factor”


While the nail technician who challenged Boyd was right — the majority of clients probably won’t pay $45 for a fill — that doesn’t mean they can’t, or won’t, pay more than they currently are. The national average price for a fill is $20.89 and $12.10 for a manicure. For the most part, prices have remained flat for the past six years, with the average price for a fill actually decreasing by about 16**. While some of the decrease can be attributed to the proliferation of price-competitive salons, which brings down the national average, at least part of the responsibility lies with salons that haven’t increased their prices in years.

But, you say, “My clients can’t afford to pay more,” or “There’s been a recession in my area,” or “I already have the highest prices in my area,” or “I can’t raise my prices because of all the discount salons that are popping up around me.” Excuses aside, it all boils down to what nail industry consultant Jim Davis dubs the “fear factor.”

Davis, co-owner of 3md Associates International in Laguna Niguel, Calif., says most new salons actually under-price their services 10% to 25%. “The thought many nail technicians have is that if they enter the market at too high a price or raise their prices, clients will not come. But most people who have nail services done usually will not choose a salon based on price within a small range of 10% to 15%. For example, if a customer is happy with your service at $19, they won’t switch to a salon where the same service is $17 (a more than 10% difference).

“If you’re about to open a nail salon and you see four other salons in a five-mile radius charging $22, pricing your services at $19 may not get you any more customers than you would have by setting your price at $22. Your salon might be perceived as cheaper — not better.

“We suggest to new salon owners that they set their prices where they want them to be. You can always do discount offers in the beginning, but show people what the regular price is even then so that they come to believe in the real price,” explains Davis.

“We have even suggested to some salons that they set their price higher than their competitors’, then offer discounts lower than their competitors’. Customers believe, ‘The new salon must be better because they charge more, but the price is lower so right now I’ll try it.’

“In the salons we are nervous because we work so personally with our clients that we are afraid they won’t come back because of an extra S2. But the truth is they will come back. People will pay more when they like a place. It’s amazing how surprised salon owners are when they do a price increase and see that they don’t lose many customers,” says Davis.

Salons have more to fear than losing clients; they may not even be able to attract new ones because of too-low prices. “If salons only knew how many people don’t come in when the prices are too low because they don’t think it’ll be a good service,” Davis says. “By undervaluing their service, many salons make people ask how they could give them a quality service at that price.”

By the same token, says Davis, salons can create a perception of high value of their services by charging higher prices. This is exactly what Shari Finger, owner of Finger’s Nail Studios Inc. in W. Dundee, III., sought to do with her last price increase. “I evaluated all the other local salons’ prices and I raised all my own — from services to retail products. I wasn’t really trying to change my prof it margin; instead I was adjusting my prices to set myself up as a more posh salon. I didn’t want to be just one of the others,” she explains.

Tamara Friedman, owner of Tamara’s Institut de Beauté in Farmington Hills, Mich., agrees. “When you’re under priced, it sends a message. Clients ask: ‘How come they’re so cheap?’ Technicians are afraid to make their prices higher; they ask what will they do if they lose clients. But they’ll get more,” she asserts.


Are You Selling Service or Price?


“There are two basic marketing positions you can take in a nail salon: one is value, the other is image. In a salon that says it specializes in beauty and fashion and is up on the latest trends, clients are going to want to be catered to with the little extras like massages, aromatherapy, etc. In a salon that’s going for price value, clients are more focused on the cost rather than the salon experience,” says Davis.

“In any price range, service is the issue. Customers are going to your salon for the best level of service al that price,” Davis stales. In other words, if a client received poor service but paid a low price, her expectations are lower so perhaps in her eyes the service wasn’t poor at all. For this reason, many salon owners recommend revamping your services along with your prices.

For example, Janeen Frankel, nail department coordinator at Robert Andrew Day Spa Salon in Crofton, Md., says her salon is preparing for its first price increase in three years. “The price increase is based on our expansion to include a day spa. We also upgraded some of our products and services. For example, our spa manicure now includes a salt treatment to exfoliate the hands, a basic manicure, a nice hand and arm massage, and a paraffin treatment.”

Paula Gilmore, co-owner of Tips Nail and Image Center in Redwood Shores, Calif., says clients must be shown new value in the service. “If you currently charge for extension repairs, for example, now include two repairs free with the higher-priced service.” With her last $3 price increase, Gilmore and her staff stopped accepting tips from clients.

When evaluating her prices, Friedman checks on what the competition is doing, as do most salon owners who are consid­ering a price increase. However, Friedman is not afraid to go above what other salons charge. “If someone is charging $12 for a manicure and it’s not that great, I’ll charge $15 because we provide atmosphere and more pampering,” she explains. “I think all services are underpriced. When you work for an hour doing a pedicure and it lasts a whole month, I think you’re entitled to $35 to $38.”

At the same time, warns Adam Broderick, owner of The Adam Broderick Image Group in Ridgefield, Conn., “Price increases are not just about operating costs, they’re about real value and the merit of the person providing the service. We recently brought in a well-known nail technician for a half-day educational event so the nail technicians learned a new skill, boosting their confidence. Their increased energy comes across to the client, who doesn’t feel taken advantage of.”


Price-Raising Recipes


When should you raise your prices? It depends on who you listen to. Most salon consultants recommend that you review your prices once a year. Others, however, review less frequently — say every three to five years. Just because you review on a yearly basis, however, doesn’t mean you need to raise prices every year. But there may be some good reasons for doing just that.

“Salons are constantly being told to raise their prices, but I don’t agree with that particular view,” says Mark Donavon, owner of Annex Salon Consulting Group in Branford, Conn. A salon should review its prices when it’s not getting the profits it should based on productivity. But you should check no less than once a year. Prices also should be evaluated when your own expenses go up, when you expand your services or salon, or when your time is fully booked.

Friedman says she usually raises service prices once a year based simply on inflation. “Rent, products, and electricity cost more, and the people at the front desk get raise once a year. I’m not really making more money; I’m just covering the basic.”

Additionally, Friedman will raise her prices to reflect — and pay for — the remodeling of her salon’s nail area. Likewise, Frankel says prices at Robert Andrews will be adjusted when the salon celebrates the grand opening of its day spa.

Another factor for an automatic price increase, says Gilmore, is when you’re 85% booked with repeat customers. “When you raise your prices you can plan on losing 10% to 15% of your client base, which makes space for new clients.”

Expansions and rising expenses aside, regularly reviewing your prices is one way to keep your business’s growth on track. “Where do you want your business to be in five years?” asks Davis. If you want your fill prices to be $30 five years from now and they’re only $20 now, you’ll need to raise your fill prices $2 a year. A 5% to 10% price hike each year is perceived as less painful to the client’s pocketbook than a 20% increase every few years, explains Davis, and it’s more profitable to yours in the final analysis.


Fattening Prices Without Thinning Clientele


“It’s never a ‘good’ time to raise prices; you’ll always have someone complaining about it. But everything is always going up and you want to pay your people and your bills — this is why you make your prices higher,” says Friedman. “I spend a lot of money on educating, training, meetings, and remodeling. It all has to be built into the prices.”

While salon consultants and salon owners say it’s normal to lose as much as 10% of your clientele with a price increase, there are steps you can take to lower that number. Davis, for example, says a highly effective retention promotion is to allow current customers to “lock-in” the old price for three months. “Give them a discount off the new price for three months. Call it your ‘loyal customer discount’ or your ‘favored customer discount.’ Give these clients a card that explains that because they are so loyal, you want them to have a discount off the new price everyone else has to pay. After three months they will roll into the new price, grateful for the break they got,” says Davis.

Friedman encourages her clients to buy a service “series.” “They can keep the old price by buying a service before the price increase takes place. I often offer a discount on a series as well, so if a manicure goes from $10 to $12 and I have a 10% discount on a series, the client can actually lock her price in at $9 for the length of the series by buying it before the increase. It’s very popular with our standing appointments.”

You also want to give clients plenty of advance notice: A client who finds out about a price increase at the time of the service is guaranteed to be an unhappy client. How you inform the client also impacts her acceptance of an increase. When Finger raises her prices next year, she plans to discuss it face-to-face with clients, as well as put her new menu in her newsletter with an accompanying article about the new services and prices.

Many salons favor posting a notice stating something like, “Due to increased costs, we have raised our prices. Effective October 1, our new prices will be...” followed by a list of the new prices.

Gilmore recommends against discussing price increases with clients because it gives them the opportunity to argue about it with you. “You shouldn’t have to explain why you are raising your prices.” Likewise, she and Friedman recommend raising prices between October and December. “The chance of someone leaving their nail technician is less during the holidays,” says Gilmore. “You don’t want to do it between January and April because people are paying off holiday bills and getting ready for a tax bill.”


Lead the Pack, Don’t Follow It


While you have to pay attention to what the salons around you are doing, lead instead of follow when it comes to service pricing. “You have to be careful when comparing your prices with other salons because you don’t know what their costs are — their rent, salaries, product costs, etc. Comparing prices tells you how you stack up in terms of marketing and competitiveness, but it shouldn’t be all you consider,” says Donavon.

Jan Arnold, president of Creative Nail Design Systems (Vista, Calif.), agrees. “You should certainly know what’s happening around you — that’s part of your homework. But don’t base your decisions only on what’s going on around you. Rather, put more importance on what your level of quality is for what you’re charging and how special and unique the service is,” she says.

“Remember,” adds Davis, “it’s more the owner’s fear than the client’s actual unwillingness to pay that prevents prices from going up.” It’s all right to be afraid — as long as you don’t let fear be the controlling factor in determining your prices.



How Do Top Salons Get Top Dollars?


The high-priced salons command the highest prices not necessarily because they do better nails, but because of the extras that come along with the service. From continuing education- to coffee and tea the little extras justify to clients the not-so-little prices. Try these tips for getting the top dollar in your area:

  • Cater to your clientele. Not all clients want pampering two-hour fills, say Blythe Albert and Sherri Isley co-owners of Expressly Nails in Washington. D.C. “We’re in the downtown metropolitan area. We’re not posh or fancy. My clients want a fill in 15 minutes, without feeling like they got a wham-bam service. We run on true and we engage in conversation with our clients,” says Albert.
  • Give clients more than they came for. “One of my technicians has been doing nails only three ears but she is my busiest technician. That’s because she knows the difference between a good manicure and a great manicure. She uses warm lotion and gives a few extra minutes of massage,” explains Tamara Friedman.
  • Educate, educate, educate. Attend continuing education classes and display the certificates to prove it, says Jon Arnold “A well-educated nail technician is not only a good technician but an educator of the consuming public. She’ll explain how she preps the nail and why, and what products clients should use at home to keep their nails perfect.” adds .Arnold.
  • Give them extras. “We have fix machines for clients and different types of coffees and teas.” says Debbie Krakalovich. “We also play the type of music they want”.

Adds Paula Gilmore “We car. customize their nails with 14 different French manicure colors that we custom blend and we offer four tip styles. We have the latest polish colors, a jewelry cleaner, and we serve wine in frosted glasses in the afternoons and evenings.”

  • Prove your worth. “We all compete and we’re all award winners No one in our area can touch us,” says Shari Finger.
  • Let clients see and be seen. “I’m in the nest expensive strip mall in W Bloomfield. The population in this area is very status-conscious and I knew this mall was a drawing factor.” says Sally Ford, owner of Nail Affair in W. Bloomfield, Mich.
  • Put the “personal” back in service. Remember the line from the “Cheers” theme song? “You want to go where everybody knows year name...” That’s where nail clients want to go, too. “Everyone makes a point to get to know everyone. Clients come here because they know they’ll be taken care of,” says Janeen Frankel. “I personally make it a point to get to know how many kids they have and what’s going on in their lives. They love to be remembered.”
  • Don’t be just another salon. “I went to great expense in making my salon not look like a salon.” Say Ford. “I put a lot of work into the murals painted on the walls. I also made it an odorless salon. We advertise that fact, and it’s a big draw.”
  • Know the trends before they do. “We try ail the new fads and we make sure we’re the first ones to offer them says Finger.
  • Haste is not always waste. “The proliferation of high-volume salons has occurred because women are short on time. Give them a good service in a short amount of time, and they’ll pay for it,” says Arnold.

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