Sell More: Tips & Tricks

However, your target price may or may not be attainable, depending on many market conditions. If your competition is charging less for an identical or similar service, it may not be possible to make the profit you want without distinguishing your service in some way. In tanning’s early boom phase, price wars became common and drove many salons out of business. The principle at work was that the more business a below-cost price generates, the more it hurts the company.

Think about it. Suppose salons A and B are both losing $1 per session because of their price war. If A is "winning" and is running 150 sessions per day to B’s 75 per day, salon A is losing $150 a day to B’s $75. They’re both cutting their own throats; salon A is just doing a better job of it.

On the other hand, if salon B combated the price war by selling sessions at cost and lost another 25 sessions to salon A because of the price difference, it would be running 50 sessions per day and breaking even. However, salon A would be tanning more customers than ever, but paying $175 every day for that privilege.

Maximum price will vary by region. Generally speaking, the going or market price will stabilize at a value determined by the community as a whole. If every salon in your area is asking $7 for a tanning session, you may have difficulty charging more unless the service you offer is perceived to be better or special in some way.

For example, if you can offer a first-rate service in correspondingly elegant surroundings, and you can communicate this to the right clientele, you may be able to persuade them that the difference is worth a higher price.

There are a number of other ways to price services and products. Loss leaders (normally supermarkets) take a loss on some items in the hope that the consumer will come in and buy other items on which the retailer can make a profit. Salon owners try this on a temporary basis by giving inexpensive tanning sessions and then making up the short fall on more expensive packages.

Flexible pricing means that the unit cost of an item is negotiable. That is, the manufacturer can afford to sell the same product at different prices to different levels of the retailing chain. For example, a manufacturer of tanning equipment can afford to sell its equipment to a wholesaler at a reduced price but would only sell at a higher price to an actual salon owner. There are two actual prices, but only one for each market.

Multiple unit prices are like quality discounts—the more you buy, the less you pay per item. Two effective strategies are skimming and penetration pricing. Skimming means getting the most profit from a product or one with limited competition. The policy quickly changes when demand lessens or competition enters the scene. Penetration pricing is charging an artificially low price (similar to loss leaders) and hoping to make up for it with dramatic sales. The low profit margin discourages competition and provides substantial benefits to consumers.

Both skimming pricing and penetration pricing have been applied to tanning with mixed results. When many salons opened, there was little competition and several salons took advantage of skimming prices to maximize their profit. Competition hit these salons hard and forced many into competitive price wars. Other salons that later entered the market tried penetration pricing but found it difficult to service heavy client loads and maintain an adequate profit margin.