Why Coupons Are Bad For Your Business

Offering coupons are a common and easy way to attract new or old clients to your salon, day spa or medical spa. But what kind of client are you really attracting? And are you profitably providing that service once the coupon is redeemed?

Your ideal client is not a coupon-cutter. While everyone loves a great deal, those that ONLY come to your spa or salon because of your promotional coupon are not likely to come around the second time. Sure, you tell yourself that you provide an outstanding service and if they like you, they'll come back. And that is logical thinking -- but it is a tad flawed. And doesn't often come true, sadly. If you are retaining more than 10% the clients that first see you with a coupon, you are way ahead of the rest of us. [To calculate this percentage, divide then number of clients who came back a second time to pay full-price by the total number of clients who used that coupon.] If you don't track your retention rates, or how many coupons are being redeemed, you should be. Measuring the impact of your marketing is the only way to can be sure that money spent on marketing is growing [and not hurting] your business.

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Every single service you do should be profitable. If you are offering a 20% or 30% off coupon, do you make any money? My guess is no. While offering a $10 or coupon might seem like a better choice, they too need to be calculated whether you are profitable. The simplified calculation for service profitability is PRICE minus LABOR COST minus SERVICE COST minus OVERHEAD equals NET PROFIT BEFORE TAXES. Labor cost is what you pay your staff (or you) to perform that service. Service cost is the cost of the products used in that service [your product supplier should be able to help you with this.] Overhead is everything else like rent, utilities, insurance, marketing expenses, etc. that you have to pay even if you don't do any services. To calculate the overhead by service, you could simply guesstimate it as 40% of your price. But to a bit more accurate, you would total your average monthly overhead costs and divide it by the average number of services you provide in a month to reach your average overhead cost per service. You'll probably find that your profit margin is 10% or less for your services -- which doesn't give you much if any wiggle room on offering motivating discounts.

There is another way. You can still attract new clients with promotions that do not require you to pay them money when they receive a service. Upgrades and add-ons are great solutions here as they don't have to add time to the service, or much cost. Some examples:
Free skin or hair consultation with first service Free deep conditioning with hair coloring Free eye creme with Botox injections Free lip or eye treatment with facial Free brow wax with your high-end facial Free shoulder massage with mani/pedi Free foot reflexology with 60 minute massage

Notice the word "free" is common in all of these promotions. Free has to be one of the most powerful marketing words you can use (but that is just my opinion). Do be careful with the giveaways however. As a general rule, they need to cost you less than 10% of the price of the service in order to maintain your profitability.

Why Coupons Are Bad For Your Business

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