Mapping Out Markdowns: How to Calculate the Ideal Discount

Use discounts to drive sales without diluting your brand

When things feel a little unsteady in the economy or your bookings are slowing down, it can be tempting to default to discounts. After all, you need clients to run a business, and your inventory is not going to walk off the shelf on its own. It’s true that discounts, when implemented thoughtfully, can boost your sales. But they can also trap you and teach your clients incorrect expectations. Let’s talk about how you can use discounts to serve your business without hurting your brand. 

Why you can’t afford to get discounts wrong

Constantly running discounts can devalue you in the eyes of clients and make them believe that they’re getting a better service somewhere else simply because they’re spending more money. That could be untrue, but unfortunately, such is the psychology behind purchasing luxuries — people believe that higher costs equate to higher quality. 

Continuous discounts can also dull the excitement of getting a good deal. After all, if something is always on sale, it doesn’t really feel like it’s a sale anymore. If you don’t watch your discount habits you can end up underpricing yourself out of business. Smaller and newer salons can be especially susceptible to this as they try to build up their clientele by lowering prices. 

The TL;DR here is: Resist the temptation to discount all the time! You want your services to be approachable, but you also need to set the right expectations and ensure that discounts don’t eat into your team’s wages or your bottom line.

How to set discounts that delight clients and grow your business

Tie your discount to a goal 

Discounts work best when you set them to achieve a specific business goal. For example, maybe you need to clear out a shampoo brand that was the product last summer but has since dropped in demand. Or maybe you’re noticing that fewer people are requesting a keratin treatment and you want to see if you can bump up sales. Either way, setting a concise SMART goal for your discount will lead you to a tangible and desired business result instead of cheapening your services. 

Keep in mind that discounts should be finite. Not only does that prevent brand erosion, but it also increases urgency to get a deal before it’s gone (“Our spring sale is almost over!”).  

Send the right message

How you present lower prices to clients matters. It’s fine to refer to them as “discounts” internally, but your clients don’t need to hear that word. “Discount,” for better or worse, tends to carry a bit of a stigma, as do words like “markdown” and “coupon.” Your clients should hear words like “promo,” “offer,” “deal,” or “perk” in your messaging. It makes them feel like they’re getting a treat versus purchasing something that has been deemed lower in value.

Let the numbers be your guide

Don’t guess which of your products or services could benefit from a discount. Use the reporting tools in your salon management software to see exactly where sales are lagging and why that could be. For example, Boulevard customers get customizable reporting templates that allow them to drill down into the numbers and share their findings with the rest of their team. 

Once you have some numbers in front of you, look at your total revenue and sales for each product and service, so you can understand the full picture. This can help you avoid spur-of-the-moment discounts or lowering your prices because everyone else is doing it. After reviewing your metrics you may very well decide that a discount on some services or products makes sense, but you could also conclude that maybe you need to adjust your service menu instead or tweak your schedule, or maybe — surprisingly — that you actually need to raise your prices.  

Use the rule of 100

You’ve determined why and where to apply a discount, and now it’s time to decide on the numbers. This is another place where you’ll need to lean into your reporting tools for information on how much you can afford to lower prices without cutting into your profits. Once you’ve made that determination, use the rule of 100 to guide how you present the discount to clients. 

Here’s how it works: If a product costs less than $100, using a percentage to show your discount is more appealing to clients. For example, a $15 discount on a $60 bottle of vitamin E serum could be written as “$15 off” or as “25% off.” In this case, the larger number, 25%, will look like the better discount in the eyes of the client.

On the other hand, a $15 discount on a $300 highlighting service will look more appealing presented as “$15 off”  than “5% off.” Make the most of consumer psychology when promoting these discounts to make them seem more appealing.

Create customizable offers 

Speaking of making things more appealing, your discounts should feel like a pleasant surprise, a delightful addition to the rest of your client’s experience. Implementing custom offers for new clients, loyal clients, clients who spend over a certain amount, and clients who refer others to your salon can make them feel special and seen, and thus much more likely to redeem their offer. At Boulevard, our customers can create codes, send thank you notes, and even generate birthday promos to clients so they feel valued.

Get the timing right

In order to feel like a highlight to clients, your discounts need to be timebound and tied to specific events or circumstances. That could mean giving discounts to new clients or providing seasonal discounts. Those could be centered around popular holidays, but you can also create your own events and offer discounts on specific products or bundle together certain services.

If you like to keep a lean inventory, loyalty programs are a great tool for pushing out products via “just for you” promo campaigns. Either way, timing the discounts right helps your brand remain valuable in the eyes of clients because the deals never linger.

Another great tool for timing out discounts is dynamic pricing. By constantly adjusting the prices of your services — lower on slower days and higher during peak times — you make the most of your team’s time and provide clients with a perk that doesn’t require instituting a new promotion.

Use the right tools

Discounts are hard to get right if you’re relying on spreadsheets and printing sale signs. Having easy access to your numbers and running promotions online makes it easier to set goals and track how your discounts are helping you achieve them. Boulevard helps personal care businesses make sure they are hitting their sales targets with powerful, easy-to-use reporting tools. Book a demo with our team to learn more.