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Case Study: Three Small (Biz) Steps to Increased Product & Service Sales, Recession Edition

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Company: Paul Hyland Salon & Day Spa
Contact: Shelly Hyland, co-owner
Location: Crystal Lake, IL
Industry: Professional services, B2C
Annual revenue: Confidential
Number of employees: 30

Quick Read

For Paul Hyland Salon & Day Spa in Crystal Lake, IL, there was no question about it. Increased competition in a luxury industry that was bound to get hurt in this economy meant the small business needed to intensify its marketing efforts and show consumers it is here to stay.

By using low-cost email marketing and coupons and launching new-client referral and reward programs, the 30-person salon is doing better than it was pre-recession—with growth in both service and retail product revenues, double the volume of new clients, and an increase in existing client loyalty—all while the beauty spa industry as a whole continues to falter.

Challenge


No doubt many, if not most, sectors are feeling the pinch as consumers continue to watch their spending in the current economy, and luxury services such as salon and spa services are certainly within those ranks.

"The spa industry is reporting that spa services such as facials and massage are 20-30% down from last year as people cut back," asserted Shelly Hyland, co-owner of Paul Hyland Salon & Day Spa.

Her salon, located in Crystal Lake, IL., has also had to face an abundance of competition of late, as big-box beauty supply outlets such as Alta Beauty strive to expand their offerings in order to stay afloat. "They put a couple salon chairs in the store and classify themselves as a salon," she said. "There are five within a ten-mile radius of our salon now, and it's tough competing against them," she admitted.

That said, consumers view businesses that continue to advertise in a recession as competitive or committed to doing business, and those that don't as struggling, according to a recent study performed by Ad-ology Research.

To stay in the game, Hyland decided it was time to "ramp up our marketing and show our clients that we can still compete," she said.

Campaign

In Fall 2008, Hyland launched the following new programs:

1. Coupon promotions

Capitalizing on the exploding use of coupons among consumers, Hyland tried a variety of coupon promotions:

  • 20% off any single service for new clients. This promotion was primarily offered on the company website.
  • Cross-service coupons, which offer discounts to current clients for trying new salon services. "We find that clients who enjoy more than one service in the salon are more apt to remain loyal," Hyland explained. This promotion was often accompanied by a note of thanks for choosing Paul Hyland Salon & Day Spa, typically delivered via email or regular mail.
  • Time-sensitive promotions, such as a $5 discount card for services booked and completed between January 15 and February 15, 2009. This promotion was launched because the beginning of the year is traditionally very slow for the business. It was offered via email and promoted to clients who visited the salon during December 2008.
  • A "growing coupon" that offered 10% off for the first visit, 15% for the second, and 20% off for the third. "Statistics show that once clients visit you three times, you've got them," said Hyland, "so we're giving them a reason to come back."

2. Monthly email promotions

Using personalized email templates supplied by email vendor Campaigner, Hyland began email campaigns at the end of each month to promote new services and product specials for the following month. The effort was another attempt to both attract clients between regular appointments and to increase retail sales.

3. A rewards program

Hyland launched a salon credit points system designed to reward clients for their loyalty and for referring their friends to the salon. Clients were automatically enrolled and received the following:

  • One point for every dollar spent on products and services
  • Five hundred points each time they tried a new service for the first time, pre-booked their next appointment at checkout, or referred a new client to the salon

Hyland also introduced periodic "bonus point specials" (typically 500 points) to drive sales for underused services, such as facials and massages.

Results

Hyland's efforts have so far negated the effects of the recession and additional competition. Highlights for 2009 include the following:

  • An average of 50 new clients a month (which is double last year's average), with 50% of those coming from client referrals
  • A 55% year-over-year lift (and rising) in retail sales for all products
  • Immediate sell-outs on monthly product specials, which Hyland noted resulted primarily from walk-in traffic (i.e., clients who had received email notification, as opposed to those who were already visiting the salon for a service appointment)
  • Steady revenue numbers for luxury services such as facials and massages, despite the industry-wide decline
  • A 10% increase in January service numbers, compared with January 2008

"We were flabbergasted that we had an increase with all the bad news in the economy," Hyland said.

Lessons Learned

This study is further evidence of the importance of continuing, or even intensifying, your marketing efforts during a downturn. The tactics that Paul Hyland Salon & Day Spa used for doing so in a cost-efficient manner include these:

  • Email: Prior to email, Hyland was using direct mail and local newspaper ads, but she has found email marketing to be much more effective and economical, especially for promoting monthly specials and educating clients about the rewards program.

    "I feel one of the biggest perks of email marketing is promoting retail sales," said Hyland, who previously had a difficult time reaching out to clients and encouraging them to visit the salon between scheduled appointments, which tend to run four to eight weeks apart.

    Even before selecting an email service provider, Hyland started collecting email addresses by enticing clients with the promise of coupons and special deals. The enticements came on the new client form (filled out during each client's first visit), on the company website, and in person via recommendations from salon technicians and staff. Around 90% of new clients submit their email on the new client form, and around 10 new addresses are submitted each month through the website, Hyland said. Her email open rates hover between 45% and 53%, likely because clients know there is value in store for them.
  • Incentives for referrals: You may not be able to buy word-of-mouth or recommendations from your current clientele—the most effective marketing tools available—but that doesn't mean you can't galvanize the heck out 'em. Paul Hyland Salon & Day Spa found rewards points to be a powerful motivator; Hyland even reported hearing of clients from shared social circles competing among themselves for credit. And as a result, month after month, the salon is seeing twice as many new customers as last year. "It's really starting to snowball," Hyland said.
  • Retention boost: Referrals or no referrals, attracting new clients isn't cheap, and it's much easier to keep a client loyal than it is to forge a new relationship. So don't forget to reward that loyalty lest your clientele start to stray. Hyland offered clients huge chunks of points for booking appointments during their previous visits and by instituting coupon and reward programs that encourage clients to try out other services offered at the salon.

Got a smart marketing story to tell? Email CaseStudies@MarketingProfs.com.

Related Links

Looking for more marketing-in-a-recession inspiration? Check out Four Steps to Marketing Smarter (and for Less) in Today's Economy to learn some other ways you can boost your marketing in tough times. Consider also subscribing to our free weekly newsletter Get to the Po!nt: Marketing in a Downturn, for other practical and timely tips.


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Kimberly Smith is a staff writer for MarketingProfs. Reach her via kims@marketingprofs.com.

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