BUSINESS SOLUTIONS | FINANCE
is the editor of Pulse
magazine, which is
circulated to ISPA
members in more than 70 countries
around the globe. Established
in 1991, ISPA is a professional
organization representing health
and wellness facilities and
providers. Additional insights on
retail and inventory management
can be found in Pulse and ISPA’s
Retail Management for Spas.
The Price is Right—Winning the
Pricing a product or a service is more than just a competitive game of numbers. There are
many factors to evaluate that make
pricing one of the most difficult
decisions a spa owner or manager
Set the price too high, and
price-conscious spa-goers will choose
competitors who offer cheaper prices.
Set the price too low, and spa owners
may end up with lower sales revenue
due to uncovered costs. Either way,
loss of revenue is the inevitable price
to pay for inaccurate pricing.
So, when it comes to the pricing
game, how do you find the sweet
Know the costs
According to Financial
Management for Spas, available
as a textbook and course through
the International SPA Association
(ISPA), profits should occur because
revenues generated have been
carefully calculated to exceed cost.
When pricing is based on a cost
approach, three modifying factors
must be considered: historical
prices; perceived price and value
relationships; and competition.
Past prices must be considered
because dramatic rate changes may
drive clients away. For instance,
if a one-hour massage treatment
with a realistic price of $60 was
mistakenly marked at $50 for a year,
it is best to slowly increase the rate
by implementing an incremental
increase over a period of time.
Know the market
When it comes to pricing, it’s
about conveying value to clients.
Thus, it is critical to understand
how to create a price point that
leads clients to believe they are
receiving a good value for the price
they are paying.
Psychological pricing. This is
an approach wherein prices are
established on the basis of what the
client expects to pay—primarily
used by businesses that believe
their clients’ perception to cost is
tied to quality.
For instance, while Western spas
generally find success in drawing
clients in by offering a temporary
price reduction, Chinese spa-goers
have a completely opposite view
toward discounted treatments.
Influenced by a cultural preference
toward upscale and imported
brands, Chinese spa-goers perceive
discounted products or treatments
as inferior in quality, making them
less likely to patronize spas that
heavily use affordable rates and
discounting as a marketing tactic.
To get valuable insight on how
price-sensitive clients are, consider
conducting an informal survey that
asks how much clients are willing to
spend on a product or treatment.
Know the competition
Understanding the competitive
market is critical because if other
factors—such as atmosphere and
service—are equal, price becomes
the differentiating factor.
Do you want to be the
price-leader in your area? Do
you want to steal market share
by offering mid-range prices?
Do you want to expand the size
of the market by setting prices
below market pricing? These are
just some important questions
spa owners should ask themselves
when examining their competition
and their own price point.
Keep in mind that periodically
evaluating the menu of services in
order to assess both pricing and
demand is the most critical part
of pricing. Aside from reviewing
the financial report, consider
involving team members in the
Jen Spencer, spa director of
Santé Spa Victoria in British
Columbia, Canada, says she allows
her team to help with various
pricing decisions and stages of
menu development. “A concierge
supervisor may give valuable
feedback on what is selling on the
floor, while lead therapists may
focus their insights on protocols
and techniques,” Spencer says.
Whichever approach you may
want to employ to play the pricing
game, remember that, in the eyes of
the spa client, the right price is the
price that offers the best value.
By Mae Mañacap-Johnson