If you are expecting to hear about how a new glossy shampoo range is going to transform your salon business, click off now. This blog post is not for you. Instead, we are going to talk numbers, figures and key performance indexes (KPI’s) that, if implemented, won’t transform your business overnight, but will give you the insight needed to optimise your salon, leading to consistent month-over-month revenue growth. Numbers might not be sexy, but do you know what is? Profit. Or as my man Leo prefers to call it – fun coupons.
Cut your churn and focus on retention
To get to the good we have to start with the bad. Customer churn is the percentage of clients that leave your salon during a specific time-frame. If your average customer returns to your salon every 6 weeks, 8 weeks would be a good time period to track your churn rate, as it allows for a couple of buffer weeks.
Imagine you have 100 customers and after 8 weeks 33 never book your salon again. Your churn rate is 33%. However, the problem runs deeper than that. Not only are you going to have to find new clients to fill slots that have become vacated, but you are missing out on a huge amount of revenue - more than may be immediately obvious. Research suggests that acquiring a new customer costs 5 times as much as retaining an existing one, and returning customers, on average, spend 67% more than new customers. Based on this, your existing clients could be netting you 250% more revenue than a new client.
How does that work?
Imagine you have 2 customers coming into your salon - a new client and an existing client. Your new client discovered your salon because you spent £5 on a promoted Instagram advert with advertised a £5 off voucher which they redeemed on their first visit. Therefore, the Customer Acquisition Cost for this client was £10. As stated previously, the cost of retaining an existing client is 5 times less than discovering a new one - in this case just £2. This could have been the cost of a sample shampoo bottle you gave them after their previous appointment, encouraging them to rebook and prompting them to buy a full bottle at their next appointment.
Customer Acquisition Cost - £10.00 Promoted Instagram post - £5.00 Voucher £5 off first appointment - £5.00
Total Customer Spend - £27.00 Average female haircut – £27.00
Gross Profit - £17.00
Total Customer Spend (£27.00) – Customer Acquisition Cost (£10.00) = Gross Profit (£17.00)
Customer Retention Cost - £2.00 Trade cost of shampoo sample given to client at previous appointment
Total Client Spend – £45.09 Average female haircut- £27.00 67% extra industry average spent by existing clients - £18.09
Gross Profit - £43.09 Total Client Spend (£45.09) – Customer Retention Cost (£2.00) = Gross Profit (£43.09)
Gross profit increase for serving existing client – 253% (43.09/17.00) x 100 = 253
From this, it is clear that cutting the churn rate is key to your salon's success - a reduction of just a few percent on this number can boost the salon's profits dramatically over the course of a year.
"I'm fully booked that week, how about the Tuesday before?"
How often your clients visit your salon can also have a dramatic effect on your bottom line, without the costs associated with acquiring expensive, new clients.
Let’s run through it…
Our example salon has 250 clients The average salon spend per client visit is £27.00 Average client visits 5 times a year
250 x £27.00 x 5 = £33,750 Revenue
If we can increase the average frequency of client visits over the course of a year to 8 times - roughly every 6 weeks - we can boost the salon's operating profit by 62.5%.
250 x £27.00 x 8 = £54,000 Revenue
Increasing the amount of visits that your clients make per year may seem daunting, but we have a couple of tips to make it effortless.
1.) When rebooking an appointment, if the client cannot make your suggested date, always offer an earlier appointment. When applied to every client, these extra days all add up.
2.) Maintenance appointments. This could be something as simple as a fringe cut to make their hair feel fresher for longer, or a treatment which will help their colour last. Every time a client steps into your salon is an opportunity to sell products, further boosting your income.
3.) Make your clients feel special. Seems simple doesn’t it, but if you make your clients feel special why would they ever want to leave? Check out our blog post how to attract loyal clients into your salon and make them stay.
At Beu, we believe technology can improve relationships. We do this by always putting people first. Beu is a platform for the hair and beauty industry that builds and maintains relationships between clients and their stylists, by making every booking personal. As long as you look after your clients within the salon, we will take care of them between appointments. Find out how Beu can squeeze out every drop of profit from your business by downloading the app and getting set-up today.