Are salon and spa memberships for you and your business? Before you say, “Where do I sign up?” consider some of these important facts. Read on as we explain the good, the bad, and the often-misunderstood business models of memberships in salons and spas.
First let’s look at what salon and spa membership is. Typically, there are three types of membership systems available. All three tend to be paid through a monthly charge to the client and the client receives a benefit for that monthly charge. There is usually a membership contract involved for a specified amount of time. The payments are typically automatically debited from the clients’ bank account or credit card, and there are usually penalties for cancelation.
Client Loyalty System
Now let’s look at the first type of membership system. This membership type involves the client paying a set monthly amount and receiving a generous discount on services and products. This type of membership system is what we refer to as the ‘Client Loyalty System’ and it usually looks something like this: The client joins the membership for one year, pays a monthly price of $19.99 (example only) and receives 25 % off on all products and services.
Client Service Discount System
The second type of membership system involves the client paying a set monthly amount and receiving a set amount of services included with the membership. This type of membership system is what we refer to as the ‘Client Service Discount’ system and it usually looks something like this: The Client joins the membership for one year, pays a monthly price of $99.99 (example only) and receives two blowouts, one single process color and one haircut per month, with no carryover of unused services. This system will typically have your customer coming more frequently and using all the services included, so be prepared to handle the workload.
Unlimited Membership System
The third type of membership system involves the client paying a set monthly amount and receiving an unlimited amount of services included with the membership. This type of membership system is what we refer to as ‘Unlimited Membership System’ and usually looks something like this: The client joins the membership for one year, pays a monthly price of $99.99 (example only) and receives unlimited blowouts, single process color, and cuts per month. This system will be seen as a beauty lifestyle membership and is the gold standard of memberships.
Note: We used hair memberships as an example but the same is true for spa services and nail services.
Basically salon memberships are like a loaded weapon. If used in the right hands it can be the savior of your business but if used in the wrong way, it can be the death of your business.
By doing something like running a system of unlimited blowouts for $69.99 per month and having only that one membership available, many salons fail, even go out of business. The reason this happens is because:
• They are using the system with the highest frequency of visit.
• They are probably using a commission pay structure.
• They have no clue as to how many members each operator can service.
• They don’t know what the costs of servicing the members are.
• They have no upsell plan.
• They have no advertising plan related to memberships.
So to summarize, the bad comes when salons and spas jump into membership without a proven game plan.
A good membership system fixes just about every problem we experience and complain about in the industry.
Greatly Reduces Employee Turnover
Membership systems force a team mentality. The client will have the opportunity to meet and take advantage of many different stylists. Therefore, if a particular stylist goes on vacation or leaves, the client will already be comfortable with other stylists in the salon. Even if the stylist is considering leaving, the clients will still in most cases remain with the salon because they are under contract with the salon, and again are comfortable with other stylists.
With membership systems, the client’s credit card is automatically charged each month for her/his membership dues. Therefore, the salon owner knows that a certain fixed amount of money is coming into the salon prior to beginning business the next day, guaranteed.
Salon Payroll Cost
Typically, with membership systems, there must be a corresponding pay system. Along with the revised pay system there are bonuses for the employee such as the clients being under the perception that they are not paying for a specific service, therefore creating a substantial increase in employee tips. This shifts the burden from the employer’s payroll to another great source of income for the employees. Let’s remember that tips are a major source of an employee’s compensation.
Attracting New Employees
Word-of-mouth has always been a key to building any business, especially in the personal service and beauty industries. This also greatly holds true for stylists. When word gets out as to how well the stylist is doing monetarily, it will attract other stylists from other salons to your salon.
Attracting New Clients
Selling a membership is much easier than selling a service. Clients don’t buy what you do, they buy why you do it, and selling a beauty lifestyle membership is something you can get behind with your heart.
So, now that you understand more about memberships and how they work, how can you use this valuable tool in your salon or spa?
A former multi-salon owner, Derek Hull is the owner of SalonOps, a consulting and coaching firm that works with salons and spas that wish to pursue the dream of financial freedom. SalonOps is proud to work with Rosy Salon Software and offer its clients unlimited business coaching with no upfront costs and only be paid for increasing your revenue.