Evaluating Your Salon’s True Potential

At a recent seminar I discussed my findings with a group of salon owners. While each agreed that they need to do more to effectively increase sales, they all enlisted a similar defense when it came to explaining the actual number of people in their databases. While most salons had 3,000 to 6,000 customers in their databases, the owners were quick to add that up to 50 percent of those customers were not active.

When I asked them why this number was so high, they said the customers had just stopped tanning. They commented that the moochers just came for the free tan and they never saw them again. They also believed that those tanners were spies for the competition. However, the reality is that many of those customers are still active-just not at their salons.

Of the 3,048 new customers who tanned in the case-study salon during its first year in business, 92 percent, or 2,804 people, had at one time been customers of one of the seven other existing tanning salons in town. Only 244 customers never had tanned indoors before.

On average, we can estimate that each existing salon lost about 400 customers to the new salon. And if we estimate an average of $62.99 spent per customer per year, each salon lost about $25,196 in business to the new salon.

In the world of business there are only two types of customers: Those you create and those you steal. I am convinced that most new salons steal customers from existing salons, and only a small portion of the database are new customers. Some people disagree with my observations.

However, logic dictates that the number of new customers tanning indoors could not be growing at a rate much higher than 8 percent to 10 percent. Otherwise, all salons would prosper to some degree and there would be little reason to be concerned about the competition.

So how and why does this happen? How can a new salon open in an established market and quickly inflict such heavy damage?

First, equipment companies will never stop trying to sell new tanning systems, and entrepreneurs will never stop seeking new business opportunities. Therefore, competition is inevitable. It is how we choose to face competition that dictates success or failure. You can sit back and watch it happen, or you can create and maintain a continuous, proactive campaign designed to maximize profitability while keeping existing customers active, happy and loyal.