Raising Tanning Prices

In this industry, pricing strategies are hotly debated among salon owners. Many say that constant undercutting by competition has forced them to keep their prices low to remain competitive, instead of being able to raise prices like other industries. So, when a TanToday.com member posted a thread about this topic a few months ago, it wasn’t surprising that it quickly turned into a four-page discussion.

That’s when LF decided to look a little deeper at this matter by talking to Tony Hartl, founder and CEO of Dallas-based Planet Tan. Hartl was featured on the June cover of Fortune Small Business Magazine and interviewed about his experience and success with customer-service metrics. And, unlike other veterans out there, Hartl doesn’t agree that the pricing issue can be resolved by simply having all salons raise their prices across the board. He says it’s a matter of creating added value.

LF: Many salon owners are complaining that the price of everything is going up—except in regard to tanning services, and that makes them feel like they can’t raise prices. What do you think?

TH: We have not raised rates. I know, strategically, this is an opportunity for retailers to take advantage of the state of the economy. You have to pass prices along. Unfortunately, there is some inelasticity in certain retail categories, such as beauty, and tanning falls into that category. And because we are at a lower price-point within the beauty category, we need to be price-sensitive and focus on preemptive moves, such as added value. Planet Tan has done this by discounting certain lines of product that are moving slowly and by packaging tanning services. We’re still getting people to spend money and we’re encouraging them to use the salon more often. Our whole ratio really comes down to how often people are visiting the salon.

LF: Some owners say that prices have been driven so low by the salon down the street; they can’t compete.

TH: I disagree. Creating additional value doesn’t erode your margins. You can offer discounts while maintaining your pricing integrity. Of course, the economy is tough right now—budgets are tight, unemployment has gone through the roof and home prices are falling. But that said, it just means that people are looking for a better value. Everybody likes a deal. The idea is to look at it as generating more income from your existing customers and getting new money from new clients. Instead of dividing the pie, you’re enlarging it. In addition, people will pay for an experience. I personally shop at Whole Foods, and when I go in, I don’t think about the milk being a dollar cheaper down the street because I’m willing to pay more for the experience I get while shopping at Whole Foods. Owners who say they can’t compete might think they are competing with other salons for share of wallet, but share of time is more important. People have a choice about how and where they spend their time, and the experience has more to do with that than the price.

LF: Should there be an industry standard for pricing?

TH: No—that’s called a monopoly. There’s a place called Planet Fitness that charges $10 for gym memberships. Meanwhile, the Equinox charges $150-$200. And, you know, it might be the same Stairmaster, but it’s not the same experience. The tanning industry is the same; therefore, each salon owner has to look at his or her individual business proposition and ask, “What am I offering my clients?” If you are providing low value for a high cost, you can only get away with that a few times. On the other hand, if you are offering high value for a low cost, you’re not going to make any money. The price you are charging must be proportionate to the experience you are providing.

LF: What would you say if a customer came in and asked why your prices are higher than the guy down the street?

TH: I’d say, “Because all products aren’t the same.” Then, I’d explain the benefits of what I’m offering and ask that customer why they aren’t at that salon down the street whose prices are so much lower. It’s probably because the hours weren’t convenient or they weren’t comfortable at that salon—basically, that they aren’t just buying something based on price, they are looking to buy an experience.

LF: What would you say to the salon owner who says that he offers products and services similar to those of his competition, but his competition is getting more business and he thinks it’s because of pricing?

TH: I’d say he needs to compete and change his attitude. They call it business for a reason.

This article was inspired by a TanToday.com discussion thread. To read the original thread, visit www.tantoday.com/forums/salon-discussion/31040-prices-go-up-everything.html.