Electronic Funds Transfer
How Salons Can Benefit From EFTs
by Heather Gonwa
Plugging into Profits
Gaining popularity in the early 1990s, EFT has become a simple and effective way for savvy business owners to generate consistent revenues. Virtually any salon can benefit from the use of an EFT program, although salons that are computerized and that have at least six pieces of tanning equipment may find it more beneficial.
EFT membership programs are as easy to implement as they are advantageous. A client must fill out a short enrollment form, choosing a payment option such as their checking or savings account or a credit card. Payments automatically are transferred each month from the client's account to the salon's account. If a client eventually wishes to stop making payments through an EFT program, he or she generally is asked to give written notice within 30 days of the final transaction.
One of the benefits salon owners receive through the implementation of an EFT program is client retention. "Because clients no longer have to think about paying for tanning, as it happens automatically, the end result is that they will tend to stay with the salon longer than they would otherwise," says Aaron Roehl, sales manager of recurring payments for Houston-based TeleCheck International, Inc.
When a customer signs up for 10 tans or a month of unlimited tanning, both packages are used for their duration with no guarantee that the customer will return once the tanning time is used up. However, signing up a customer for a membership and then setting them up on EFT guarantees that the salon will retain that customer month after month.
In addition, by charging an initiation fee for a membership, a salon can make more money up front and charge lower monthly fees. Because the monthly fees are lower, members will decide that it's not worth it to leave the salon for the two or three months they don't tan during the summer, in addition to not wanting to pay the initiation fee again. Another benefit is that the salon is generating the same amount of income even if the client does not come in to tan as often.
"During the first month of their membership, the customer typically will use the beds often, but once they have received their tan, then they simply are maintaining it," explains Dick Mitchell, vice president of health and fitness services for Columbus, Ohio-based Checkfree. "The salon is still receiving income every month, but instead of people using their unlimited tanning daily, people are coming in to maintain their tan, who don't use the beds nearly as often."
Additionally, another reason a salon generally is able to offer a discount on EFT memberships is they eliminate the manual labor of accepting payments physically and having to note or update accounts. "Since it is automatic, EFT eliminates the human component of time," says Sid Nelson, head of business development for Kansas City, Mo.-based Affiliated Acceptance Corp. "Every time the sales staff has to deal with accounts, it costs money, when they could be servicing their existing clients and enrolling new ones."
Perhaps the greatest benefit of utilizing EFT is its ability to help salon owners generate a year-round cash flow and maintain a steady income level, even during a salon's slowest season.
"The largest benefit of EFT is that it is a continual program," says Nelson. "Salon owners continually are bringing in money whether or not someone walks in the door. Without a continuing EFT membership, they are dependent on customers walking through the door and physically handing them money. But by offering an unlimited tanning membership, and thereby drafting payments electronically out of a customer's checking or savings account, they are receiving income without depending on the customer walking through the door."
With EFT, salon owners not only are guaranteed income during slower times of the year, but also know how much income they are going to receive and at what times of the month.
"The key with any business is to have a cash flow coming in every month," says Jeff Grissler, president of Quest Resources in Neptune, N.J. "With EFT, salon owners know that on the first or the 15th of each month, if they have 30 people on the EFT program, they can expect to receive $1,000 or whatever the fees are that they charge. They know that the money is going to be there before they even open the front door."
Because the customer is billed every month and comes in to maintain his or her tan throughout the year, EFT provides salon owners with an annual income as well as an annual cash flow, instead of having to "make it or break it" in the winter or spring.
EFT also offers many benefits to the customer. Tanners who purchase memberships know they can maintain their tan throughout the year, taking any last-minute franticness out of the tanning experience. In addition, customers on EFT generally are charged a lower fee since the salon owner is guaranteed that income month after month. Overall, EFT proves to be a win-win situation for both parties.
Marketing an EFT Program
The salon owners who are making money throughout their slow seasons with the use of EFT inevitably are the ones who have a strong sales program. Every new customer should be given the opportunity to join a salon's EFT membership program, and getting customers to join begins with a strong sales staff.
"Salon owners need to have a structured sales program and an effectively trained sales staff," says Nelson. "Most of them have heard of EFT; however, they have no concept of the presentation of it or the sales of it. They present it as, 'We'll just take $20 per month out of your checking account and you'll have an unlimited package.' There's no value in that--they haven't gone over why this person is looking to tan, what they like about tanning, or what they did or did not like about their old salon. All of these issues need to be addressed in order for a tanning salon to have a viable EFT program."
Nelson adds that the salon's sales staff must know how to give a tour, how to overcome objections on the floor, how to structure the price presentation through to the close, how to take inquiries over the phone and set appointments, and how to obtain referrals at the point of sale.
"The people that have EFT down to an art form are health club owners," he says. "What salon owners need to do is tour a health club as if they were going to join the club themselves." Nelson notes that most health clubs have fine-tuned their EFT sales presentation and salon owners can learn a lot from experiencing the presentation first-hand.
In addition, he says it is imperative for sales staff to overcome customers' objections on the floor before they begin their price presentation. "The real sales process happens out on the floor," says Nelson. "If you haven't overcome all objections on the floor, then when you sit down with the customer and give them your presentation, it's nothing but a pressure situation. If you overcome objections on the floor while you're touring the facility, then it's simply a matter of signing them up."
Many companies provide salon owners with materials and services to aid in their sales presentations. TeleCheck provides its clients with EFT marketing materials as well as consumer enrollment forms. "Our marketing materials will give salon owners ideas on words to use and words not to use in their presentation, as there is a right way and a wrong way to do it," says Roehl. "We also will provide them with an unlimited supply of consumer enrollment forms to have handy at the point of sale."
In addition, Checkfree provides salon owners with EFT marketing materials on a disk that can be taken to a printer to have brochures printed from it. The materials feature common questions and answers to help customers feel secure about EFT and to educate them on how it works. The company also has signs and newsletter articles available to sales staff to aid them in their presentation.
There are a number of ways a salon salesperson can market the idea of EFT to their customers. Grissler suggests catering to a client's continual desire for more time and less stress.
"In today's busy world, the customer will know that when they come to your salon, they don't have to worry about filling out any paperwork," he says. "They can do it once and their payments are deducted from their account with no hassle. When they come in, it's more of a relaxed atmosphere. In addition, EFT is a budgetary tool. The customer can obtain a report from their bank at the end of the month that will show how much money was deducted and what it was used for."
Roehl notes that another effective sales approach is to price a membership attractively and then make the EFT program the only way to pay for the membership. "The approach should be non-threatening, such as, 'We're going to put your bank or credit-card company to work for you--they're going to pay this automatically for you every month and you're not going to have to worry about it.' The wrong approach would be, 'This is a debit program, and on the 15th of every month, we're going to go into your account and take out $30.' Anything that gives a consumer the impression that they're losing control will scare them. It sounds more friendly to say that their bank is going to take care of the payments for them and they're not going to have to worry about it."
