Written for Love Portraits Blog By Guest Blogger Clare Bareja – Salon Media Genie
Why is treatment pricing important?
Pricing your treatments is more important than you probably think. Not only is it one of the basic keys to determining whether your business is a success or not financially, but also the psychological messages you are conveying to your clients.
Why do you need to price your treatments correctly?
If you don’t charge enough for your services and products then you’re simply not going to make it as a business. I know that sounds dramatic, but it’s true. Over half of all businesses will fail in the first few years so make sure you’re not part of that alarming statistic by charging the right amount.
But just as important, is the message you are sending out to your clients by the way you price. So many wrongly believe that most people buy on price. They don’t, only about 20% do. And they are also the 20% you don’t want! They are the bargain hunters; those who don’t value you and your service and who will display no loyalty to you. They will cause you most of your problems and they will expect further discounts. And after all of that they will then go off to the next company who is running a Groupon deal. There are better clients out there, you deserve them, and you should be actively targeting them.
How to correctly price your treatments
There are a number of factors which you must consider when determining your pricing. If you’ve a got new line of treatments then you can apply these principles, but also you should do the same if you’ve not reviewed your existing prices for a while. When was the last time you put your prices up?To begin with, you must make sure that you’re charging enough for financial reasons. You must know your exact costs for everything you offer and then you must factor in a profit.
Remember the cost of the product or service is not only the physical cost, but also all of the overheads too. You should consider making a spreadsheet with all of your costs so that you know you’re not missing anything.
Include all of the direct costs of any product or service. This includes all labour and physical product costs as well as the cost of marketing the product or service.
You should have a column with all of your indirect costs. This relates to the costs of running the business overall. So your premises, heating, equipment rental, telephone and so on.
The total of these columns should give you an idea of how much you need to sell of your products and services for to cover your costs. Of course, you will need to work out the quantities you think you can sell as well as factoring in some profit for yourself. Don’t forget to pay yourself!
Now this explanation has been simplified and the details of the economics involved is rather outside the remit of this blog, but the point to take away is to make sure first and foremost that you’re making a profit with every single sale!
Now you know that you’re at least charging enough to cover your costs, let’s look at how much extra should you be adding on. Well you should know what your local competition charge, to begin with. I’d recommend against
being the cheapest, as explained above, but unless you’re really special then you should probably not aim to be the most expensive either.
How much are people willing to pay? What does it say about you as a company? Does your pricing fit in with your branding and your USP (Unique Selling Point)?
You don’t want to price yourself out of the market, but you do want to make sure you’re valuing yourself and what you do. Think of the impression you’re giving off.
If you’re already up and running then I’d recommend checking that you’re charging enough for your services. Not only by checking the numbers carefully, but also by applying the following very simple test;
Put your prices up 10%. See what effect that has on your business. My guess would be that it has no negative bearing at all and you’ll enjoy a healthier margin. Most people have a tendency to undersell themselves. Don’t fall into the same trap.
Don’t feel like you shouldn’t put up your prices. I know it can feel scary and you fear you’ll lose clients – but you won’t. It’s likely your suppliers have upped their prices in the last 12 months – so your cost per treatment has increased.
It’s also likely your customers have had a small pay rise too – so why shouldn’t you follow trends?
A few pounds on a treatment will not make a difference except to your profit margins! You can create a simple chart to help you see where you are pricing yourself amongst your competitors. This will help you understand if you are in line with competition. So many businesses either under charge – losing them valuable profit and under valuing their business, whilst the other half over price and scare off customers.
Knowing where you sit is a vital part of this exercise, so be sure to complete in full and take a good look at what you are charging.
Choose 5 competitors in your local area, then pick 8 treatments that you offer most regularly and list them in a column under ‘Treatments.’ Then in a second column, list your charges for each treatment. Then, jump on the websites of your 5 competitors and write in what they charge, then add up all of
their charges per treatment, and divide by 5. This will give you the average treatment cost in your location. Lastly, calculate the difference between what you are charging and what your competition is charging. This exercise will help you work out if should be raising your prices.
So, are you charging enough?
It’s time to take a look at your price list now and decide whether you should be increasing your prices. Remember, your costs go up all the time. Suppliers of products, rates, taxes – everything increases.
It’s economics for prices to rise – and you are no different. If one or two clients are unhappy with a hike in prices, just explain that your costs have risen and you’ve had to finally put prices up – but you have kept them as low as you can so they can still enjoy your exceptional services.
If you lose a client or two, they aren’t loyal to you and you should spend your time focusing on clients that support you and understand your true worth and value.
We hope that this has been helpful. If you need any further help please get in touch with Clare here: