ASSESSING THE LONG-TERM VALUE OF DISCOUNTED GIFT VOUCHER PROMOTIONS
A business owner recently asked me what I thought of gift voucher promotions like, ‘Upvalue Your GVs by 25%’ for special occasions like Christmas, Valentine’s Day, Mother’s Day, etc.
I think they are a strong GV strategy. First, most of the time, when a client purchases a gift voucher for a friend or family member, the receiver is often a new client to the business. I like anything that brings new blood into the business.
Secondly, because beauty salons and skin clinics are first and foremost long-term business models, meaning you’re not looking for one-time clients, you’re looking for clients who come in once, are absolutely delighted by the service they receive, and return month after month at least once a month. Your business is RETENTION driven. And retention is born from the introduction of new clients.
No one loves to give away stuff away or discount big but if you’re going to do it then make sure you understand that any heavily discounted offer MUST have a long-term strategy, where any short-term loss (be it small or big) is offset by a long-term gain.
If you’re confident of your retained client journey, starting with a full consultation, written prescription and then timely engagement of the prescription, (where a client has treatments as recommended and replenishes her homecare products as they run out), then what does it matter WHAT you give away in that first voucher?
Consider ‘Upvalue Your GVs by 25%’ as an example.
If someone purchased a Gift Voucher for $200 to give a friend for Christmas, with the ‘Upvalue Your GVs by 25%’ offer, you would have given away $50.
What does it matter that you gave away a $50 treatment voucher for a good chance of a retained client spending anything from $3,000 to $10,000 a year? The freebie loss, pales in comparison to the long-term gain, hopefully year after year.
Let’s take the annual spend of a typical example client.
Julie uses her voucher for an ABC facial and has a full skin consultation and a prescription is written up for her.
Here’s what was prescribed
Cleanser $73.00
Exfoliator $73.00
Day Serum $145.00
Night Serum $145.00
Moisturiser $135.00
SPF $90.00
Eye Cream $120.00
Mask $85.00
Total $866.00
Julie will replenish the products 4 times in the year as she runs out of each of them. That’s $866 x 4 = $3,464 in annual retail purchases.
She has one course of 6 fortnightly peels which take 3 months. Each peel is $160 but because Julie paid up front, she only paid for 5 and received one free. $160 x 5 = $825 in annual courses.
For the other 9 months of the year, Julie has a monthly maintenance treatment at $160 each. $160 x 9 = 1,440 in annual maintenance treatments
In total Julie spends $5,729 in a year. Was it worth giving the $50 you had to give away to make $5,729? Heck yeah! That $50 represents less than a 1% discount!!
“Not every client will convert this way” – you say.
Ok then, let’s be super conservative and say only 1 in 3 converted, and let’s put some numbers behind this.
21 Christmas Gift vouchers were sold for $200 each which means $1,050 was given away.
Out of the 21 vouchers, only 7 converted = $5,729 x 7 = $40,103 revenue generated in one year. You gave away $1,050 to generate this. Was it worth giving away $1,050 to generate $40,103? Double Heck, yeah! The $1,050 only represents a discount equivalent to 2.6%.
TWO VERY IMPORTANT THINGS:
- The products included in the skin prescription represented a conservative prescription. Many clients purchase more than two serums, and more than one mask and invest in two courses of treatments a year, not one. So, super super conservative.
- A good therapist could convert more than 1 in 3 of the gift voucher clients. If a therapist converted 1 in 2 (half), then the business would have given away $1,050 for a revenue generation of over $60,000. How piddly is the $1,050 now?
Strategic. In particular, lucrative, retention, and long-term strategies.
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