It’s that time of the year again … summer (insert sarcastic exclamation points). This is when the rest of the world gets excited and looks forward to all year; but for us Tanning Industry folks, it’s the opposite. This is the time of year that we dread … and many industry veterans refer to this time of the year as “JASON.”
This month, I want to talk about the importance of retaining your existing customers. Yes, we all want new tanners to come through our doors, but traffic during the summer tends to slow down and we depend on our bread-and-butter salon guests to keep us going. First things first: let’s figure out your customer retention rate. This is a nice gauge of how successful your staff is at keeping tanners coming back. (You can see below how to figure it out.) Most companies strive for a retention rate of 75% or higher.
I’ll break it down for you with an example. You start the month with 100 customers and by month’s end, you have 105 (15 cancelled their contracts and you gained 20 new ones). Here is the math:
((105-20)/100)) X 100 = 85%
So that means that 85% of your salon guests are continuing to use your services, thus a customer retention rate of 85%. Pretty easy, right?
Here are some cold, hard facts about customer retention:
• It is 5-7 times more expensive to acquire a new customer than to keep an old one.
• Every customer lost costs a company $234.
• Loyal customers are worth up to 10 times as much as their first purchase.
• According to Harvard Business School, increasing customer retention rates by 5% increases profits by 25%-95%.
People don’t do business with businesses; people do business with people. Make sure your staff knows that your guests make or break your business. If you treat each one as if they are your one and only, they’ll have very little reason to leave you. Find out what products they like, what they’ve used in the past and what their tanning goal is, and then do whatever you can to help them achieve it.
Not all words are created equal. Certain persuasive words help to encourage customers to buy and spend more than others, in particular: free, new and instantly. When people hear these words (and the promises they imply are backed up), they’ll feel more rewarded with their purchases than they would have otherwise. And, they’re more likely to tell friends and family about their good experiences with your business.
Everyone wants to be recognized – I know I do. One great thing about loyalty programs is the perks. There is one caveat, though. This only works when people know there is a class below them on the totem pole. I compare it to my frequent flyer programs. I fly Delta most often and because I do, I’m a Delta Diamond Member. This has benefits like free upgrades, more miles earned and priority boarding, but I know that as a Diamond, there are tiers below me like the Platinum, Gold and Silver. Just by joining Delta’s frequent flyer program, you become a “Skymiles Member” so no matter how little or how much you fly, you are rewarded. I like this idea for tanning salons. Creating “tiers” gives your guests something to strive for. This can be based on product purchases or membership levels, but either way, it creates a type of loyalty.
The main takeaway here is the importance of being proactive with your salon guests. It’s like any relationship in your life – if you’re not putting forth the effort you need to maintain it, someone, or in this case, another business will. Save yourself time and money and direct your focus toward customer retention.
As Director of Brand Development for Devoted Creations’ family of brands, Lisa brings 17 years of industry experience, knowledge and enthusiasm to all aspects of the business, including social media, product development, training, customer relations, public speaking and marketing strategies. Lisa worked at the salon level managing a large chain of salons, which infuses her sales training and brand concepts with real world experience. Lisa has been chosen IST Magazine’s “Person of the Year” four times.
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