Up-sell, Cross-sell
At a hair salon called L’Auberge they ask customers, as they are paying, whether they need any supplies today. If they say no, then they say, “
We have a special promotion today. You get to grab a discount coupon from our hat. You can win a 10-50% discount on “ABC” products, which is
good for only today.”
The result, 75% of the people grab a coupon and 50% of those purchase supplies. This equates to 37.5% of their customers, spending $12 they
would not have spent originally – after all, they already said they did not need supplies today.
At a margin of 50%, this is a $6 increase in profits. If their average customer spends $30 per visit, and they make a $15 profit, then the cross sell
increased their profits 40%! And incidentally, how much did it cost to implement –zero! How much time did it take to fold those tiny pieces of paper
and write a percentage on them – minutes! And here is another important distinction. It is easy to assume that the customer would have
purchased the products on their next visit. Perhaps, but the key is, not necessarily from you!
The Hair Stylists we discussed earlier that offered hair products at the point of purchase can also offer to give a special scalp treatment or
pedicure or manicure (if the client normally does not purchase these services). They can also offer to cut other family members hair for half-price
if they set an appointment before they leave.
Increase Frequency of Purchase
In returning to the hair salon example, you will recall that I needed a haircut every three weeks but averaged one every five weeks. And that
getting me in sooner would result in a happier customer and 70% revenue gain. So what impact could this strategy yield in applied to all of their
customers? I am going to whip through this analysis to give you an idea of the process. If you care to follow along, the details are located in
Illustration 3A, in the workbook section at the end of this session.
• Let’s assume the salon does $300,000 in annual sales and their average customer spends $500 per year. This means they have 600 regular
customers. Assuming that only 50% of them fail to make appointments or keep them consistently, means they have 300 clients that they can
impact.
• Assume further that out of those 300 who are poor appointment makers and keepers – only 50% are motivated to come more frequently. Now
they are down to 150 souls to impact.
• So what we are saying is only half of their customers are prime for this strategy application and only half of those are even interested in more
frequent service; or stated another way, one-quarter of their clients would benefit from such a program.
• Assume further that only 50%, of the qualified clients actually responded to the follow up efforts. This leaves only 75 clients that will increase
their frequency of purchase – does that make sense?
• These 75 customers already spend $500 per year, by coming in 10 times per year (once every 5 weeks, spending $50 in total). But now by
coming every 3 weeks, they come 17 times per year. At $50 per visit that equates to = $850 or an increase of $350 per year.
• 75 customers spending $350 more produces $26,250 in found revenue! And what does it cost in time and resources to implement this strategy?
• Let’s assume they use a combination of Monthly Reminder Postcards and the receptionist calling during slow hours.
• Sending the reminder postcards, only to the clients who don’t set or keep appointments, will cost about $75 per month or $900 per year. The
receptionist can call during slow times so the costs are virtually nonexistent
• So what is marginal profitability? If we assume that the salon has a gross margin of 50%, then the additional $26,250 produces $13,125 in profit.
Deducting the $900 spent on the postcards gives them a marginal profit of $12,225.
• And over a 5-year business life it is $61,125 in profit.
Example Message for Telephone: However, instead of saying, “This is Bill from Hair Styles Etc. calling to set your appointment, please call us at
555-1212”, leave specific information that will enable them to make the decision. This way they can call any time, day or night.
So, you might say “This is Bill from Hair Styles Etc. calling to set your appointment. Tom has Tuesday at 4:00 or 7:30 and Thursday at noon
available this week and Wednesday at 6:30 next week. Please call us at 555-1212 between 9-7 or at 555-1111 anytime to leave a message. We
will then confirm your appointment. Have a great hair day!”
Now isn’t this much more powerful. You have given specific actions to take and made it easy for them to set their appointment.
Customer Satisfaction
Suppose you get a free hair cut trial offer. You go into the salon and the person behind the counter, who knows you are coming from your
appointment, says, “Hello, welcome to “Hair Extrodinaire” Mary is excited to cut your hair and is just finishing up with a client. In the mean time, I
know that Susan, the owner, wanted to meet you.
Out comes Susan and shakes your hand and compliments you (beautiful hair, dress, smile, and eyes). She then says, “While you are waiting for
Mary, let me show you around. This is our manicure/psychologist Terri. She has clients that travel 60 miles to see her. And over here is our day
spa area where we have created a separate area so you don’t have to sit in the waiting area in between treatments. We use only ABC products
and so on.”
Then when you leave, there is a gift basket filled with sample products from the owner (which of course promotes further purchases). Have you
ever been greeted this way? Wouldn’t your chances of coming back skyrocket?
Letter
Dear Susan,
Happy Birthday!
Since it is your birthday we felt you deserved a little pampering. So Mary (the hair stylist) has arranged to have Betty give you a full
manicure for your birthday.
Enclosed is the gift certificate. Simply call us at 555-1212 to set up your appointment.
On behalf of Mary, Betty, myself and the entire staff at Hair Extrodinaire, Happy Birthday
PS The gift certificate is good for only 30 days so you don’t put it off.
Note what just happened here? The clients feels incredibly good don’t they? And you just provided a gift that cost perhaps $20. But the
client spends $600 per year on average. Since she doesn’t get her nails done currently, you have a great chance to win a manicure
customer and increase revenue another $600 per year – or at least leverage off this customer for referrals.
Expanding Customer Purchases
They certainly should consider a “free first visit” when they are trying to cross sell their customer to use their manicure service or motivate the
husband to come in as well. After all, their Lifetime Value is enormous, and the probability of them converting to a regular customer is so high
because of their current relationship.
For example, the hair salon could charge full price for the manicure with a 100% money back guarantee. They could take this a step further by
providing a value added bonus – free polish or a pedicure or a sample basket worth $10 or free movie tickets and so on. They could even
discount the first visit 50%.
This is a Critical Distinction, so let me go deep into this one to illustrate why you are so willing to make such outrageous offers and how the growth
sessions we have covered so far are beginning to create such phenomenal momentum.
First, you are armed with the power of understanding the Lifetime Value of your customer.
The hair salon that adds a manicure to their client’s purchase will generate $1,000 of additional revenue per year (Over $5,000 over the five-year
average customer life). Now, using a 50% margin that’s $2,500 in their pocket! If it takes two stacked incentives plus a guarantee to get a
customer to add manicuring to their regular purchase pattern SO WHAT! It’s peanuts compared with the profit stream.
The hair salon can now up-sell this client nail conditioning products, premium nail polish, a nail dryer etc. And since the client comes in more often
(hair + nails) they have more opportunities to sell them shampoo, brushes and so on. Are you beginning to see how these growth strategies pile
on the profits?
They can then condition this client to come in at your desired intervals by applying the second growth strategy. This increases their profits by
another 10-20% or $250-$500, compared with your old pattern prior to using this strategy.
In addition, they have added a whole new referral source, haven’t they? If the client is happy with the manicure, which they will be if you employ
our customer satisfaction techniques, than they will gladly refer the salon to their friends, family members and co-workers.
And if they get just one new referral customer from their “expanded” client, they will duplicate this $3,000 lifetime manicure profit. And if that new
referral customer either expands their purchase pattern to include hair cuts or refers someone else, the salon earns another $3,000 and so on.
Do you see the incredible cumulative effect on your profits from these simple growth strategies? Awesome isn’t it?
• For example, if you are making the offer at the point of purchase or via a post card, your offer may be as short as a phrase - “Why don’t you try
Susan for your nails? I can arrange a free session so you can experience her talent first hand.” A client who doesn’t take you up on your free
manicure may love the person that currently does their nails. But if this manicurist moves in three months, their needs will change.
Compelling Incentives
If you have a hair salon, you can offer your customers a Free Manicure, as time is available. Since they are your customers you can identify which
ones will be likely candidates for this service. As a personal example, my wife stopped getting her nails done when we moved. Although she
intended to have this service done again, she didn’t get around to it for a few years. The salon that does her hair never once approached my
“stubby nailed wife”. Therefore, when she made the decision to resume her manicured look, she went to a more convenient shop. Consequently,
the hair salon lost $4,000 in Lifetime Value.
Package Synergistic Products/Services
Mario Tricocci has several high-end hair salon/day spas where they offer all sorts of pampering services for women – body wraps, special facials,
massages and so on. They have brilliantly created 15-20 packages to meet every budget and personal pampering need.
Now, this example is a Critical Distinction because it demonstrates the awesome power of packaging products and services. Without these
packages, how many customers do you think would have tried several, if any, of their 50 different services? Probably very few. But when a client
or their husband (or wife) purchases a package that includes a haircut, manicure, Swedish massage, body wrap, and a European Facial, they are
introduced to 4-5 services, which they may decide to purchase again of in the future.
By the way, I purchased one of these packages for my wife at Christmas. I waited in line 30 minutes as four order takers issued gift certificates.
The girl that helped me had done over 100 certificates that day alone! At an average of $175 per package that equates to $70,000 for the four
girls in one day!
A hair salon could offer a package that included twelve haircuts for the price of 10. This guarantees they remain customers for the year.
OR Offer “Up to X hours or Visits per Year” for a discounted price.
Other Ideas
1. Look at your attrition rates. Go to your database and find out the names of people who haven't come in recently. Write a compelling letter,
acknowledge them as being value and give them an incentive to start coming in again. If you have 1,000 former customers, you could easily
convince just 100 of them to come in again. Then if you serve them well, you will likely make continuing profits into the future.
2. Send out a letter offering a free offer. Remember the lifetime value of your customer. If you have to give away $50 up front to capture $2,000
over the next few years, it is well worth it. Test small (not the newspaper, but a limited mailing) and see how it works.
3. Hand out 2 or 3 referral cards to your current clients for every visit. Offer them and their friend they bring in 50% off their next (or first) visit.
This is a fast way to grow your customer base.
4. Have a strong up-sell policy on your new clients. Make sure they walk out of the door with everything they need that is in their best interests.
5. Do something extraordinary like offer a menu of drinks when they come in the door. Coffee, tea, juice or soda will cost you no more than 50
cents a glass. Offer a blush wine which will cost you a little more. However, ladies will talk and the idea of reading a great magazine while drinking
a glass of wine appeals to many. Give it away and watch your customer base grow.
6. Consider renting chairs in your salon to aspiring stylists. If you know that the average chair brings in $300/day ($9,000/month), and you have
records to prove it, then you can rent the chair for $3,000 month. If you have 6 chairs in your salon, you make $18,000/month in "rent" and you're
just doing the basic management. You could spend your time building relationships for your salon, marketing, or even having a glass of wine with
the customer!
7. Train your sales staff to talk about the benefits of the products you carry as they are cutting and coloring the client's hair. On the way to the
cash register at the end, have them pick up some of the products and say, "Which of these products will you be taking home today?" Your sales
should double, at least.
8. At the front desk, the stylist should say, "I need to see you back in 6 weeks (for example) to maintain that style." Book them in right away. You
will begin to book your calendar weeks in advance.
9. Joint venture with local dentists, florists, women's only fitness centers, plastic surgeons, dermatogists and Ob-gyn doctors. Create an endorsed
letter that you can send to their lists with their endorsement. Make the offer irresistible to them.
Hair Salon