In 2017 Stats Canada recorded 30,063 hair and esthetic businesses with a total revenue range of $30K to $5,000,000. 86% were profitable with an average net profit of 32%. 14% were not profitable with an average net loss of –17%. The industry as a whole generated $5bn in total revenue and employed 71,301 people. The annual growth rate from 2013 to 2018 has been 2.3%.
Why is this important? Because 85% of business growth comes from loyal customers and a customer loyalty plan is a top 10 priority for all retail CEO’s. It is 6X more expensive to gain a new customer than to retain an existing one. Rewarding existing customers with a loyalty rewards plan is a great way to increase profits and attract new loyal customers.
Paving a new path to growth with loyalty
The upsurge in home salons, higher overhead, and new technology is leading to a new landscape for a slow down in salon service and retail sales. In the U.S. salon growth appears to have declined to 1.8% in 2017, a sharp decrease from 2012 at 4.49%. Cost cutting can be part of the response, but salons cannot prosper unless they keep winning and satifying customers.
Customer loyalty is a proven way to grow your salon’s market share. Clients that are already enthusiastic about your products that they purchase are a prime market for promoting new products/services. Rewarding them as your brand evangelist is what customer loyalty programs are all about.
Big retail CEO’s know they have to focus on customer loyalty as they transform their companies to face new technologies, customer behaviour, and competitors. But few companies are taking action. Only 24% say that building and sustaining customer loyalty was a top ten priority. This disconnection provides room for an opportunity, and for many salons, optimizing loyalty programs can provide a way forward.
Digital consumers are increasingly controlling the narrative about the brands they consume through social media platforms and referrals to friends. Old patterns of consumer behaviour, advertising effectiveness, and the customer value chain no longer hold true in the current marketplace. Yet, loyalty programs still appeal to consumers and can still drive market share.
Consumers are more likely to purchase right away to earn an award in a loyalty program. Many give rave reviews to loyalty programs in which they participate. Studies show that up to 60% will pay slightly higher prices in order to earn a loyalty program award.
5 Crucial Points to Consider in Developing a Salon Loyalty Program
Crucial Question: How can a loyalty program’s business model be affordable and sustainable, while still appealing to customers?
Find the right fit: The best programs generate the most perceived value for customers while costing the least. What do your customers value? Good loyalty programs see customers take ‘irrational” actions to achieve certain benefits.
Make your rewards flexible: Change your loyalty rewards as your consumers preferences change so it can reward new buying behaviours.
Be Surprising: Clients prefer surprise deals or gifts over information on sales, special privileges, time-saving opportunities, or other traditional program benefits. Programs that offer frequent surprises can spike sales. Free gifts don’t take away points and can be customized to individual customers.
Build Partnerships: Work with your supplier to reduce costs for products is a great partnership option. Speak with an Icon Salon Consultant about ways we can partner with you to help grow your business.