Too expensive? Too cheap? Here’s how to find the sweet spot in between

When you’re running a medspa, finding the right pricing for your services is a delicate balance. You obviously need to turn a profit, but you don’t want to risk alienating potential clients with inflated prices. On the other hand, underpricing can erode your profit margin and send the message that you don’t value your services or the people who provide them. It’s up to you to find a middle ground and set fair but competitive rates.

Of course, that’s easier said than done. A multitude of factors can affect pricing at any given medspa, from the actual cost of those services to market trends to geographical location. With a little research and some smart strategizing, you’ll be able to strike the perfect balance and find the ideal price range for your services.

5 key factors that determine medspa pricing

Service costs

Your first step toward finding the ideal price point is calculating the raw costs for each service. Add up the value of the staff labor, products, and general overhead costs for each individual service and add your desired profit margin. The industry average is a 29% margin, so use that as a starting point.

Market trends

Next, it’s time to examine the medspa services market and analyze the current trends. If any services are in particularly high demand, that could drive higher profit margins. The flip side is that as certain services fall out of favor or are replaced with alternatives, they usually don’t generate as much revenue.

Understanding the market also means taking economic factors into consideration. Typically, consumers don’t splurge on luxuries when the economy isn’t doing well. However, the self-care industry tends to experience a “lipstick effect” during economic downturns, meaning that people are willing to treat themselves to small luxuries in hard times. Knowing what your clients are looking for in shifting economic conditions will help you find the right pricing for your services.

Competitor pricing

Profit margins and market trends will give you a pricing ballpark, but you have to make sure those prices are competitive when compared with local businesses. Conduct a competitor analysis and research the service menus at other medspas in your area. Don’t automatically lower your prices to undercut competitors; instead, use this data to determine whether your offerings align with their perceived value.

Perceived value

Numbers are objective. Cost of services plus profit margin equals price. It’s just simple math, right?

Not quite. While the math might be objective, clients’ perceived value of your services is subjective. They’ll only pay for something if they believe it’s worth that much, and those beliefs can be influenced by a number of factors outside of your control.

What you can do is emphasize the actual value of your services. If your prices aren’t aligned with clients’ expectations, find out why. Maybe your medspa isn’t projecting the air of luxury you’ve envisioned. Perhaps clients don’t understand that your providers cost more because of their experience and expertise. If you can find ways to match your prices with their perceived value, you’ll have an easier time attracting new clients.

Geography

When conducting a competitive analysis, you likely got an idea of the price range for medspa services in your area. But what about other areas? If you manage a multi-location medspa franchise, you’ll have to take each location into account when pricing your services. For example, locations in cities are generally more expensive than those in the suburbs — especially in metropolitan areas like New York City, Seattle, and Boston.

Geography also ties into perceived value, as city-dwellers often expect to pay more than those living in more suburban or remote areas. And because different areas have different tax codes, you’ll also have to make adjustments just to make sure you’re hitting the right profit margin across all locations.

Creative strategies for maximizing revenue

You’re not etching your profit margins and service prices into a stone slab, so don’t treat them like they’re immutable. You can boost your revenue with a few creative pricing strategies, including:

• Dynamic pricing: Using dynamic pricing allows you to adjust service costs in real time based on market conditions. By building flexibility into your pricing model, you can quickly react to trends, economic shifts, and other factors that can affect perceived value.

• Membership programs: Because medspa providers perform many services that require ongoing maintenance, they’re well-suited for membership programs. This way, your clients can pre-pay for future services, guaranteeing ongoing streams of revenue while building long-term loyalty.

• High-impact add-ons: LED light therapy, dermaplaning, PRF boosters — these add-ons are just a few ways to increase your average ticket price without a corresponding increase in operational costs. And speaking of those costs…

• Reduced overhead: If you’re still struggling to turn a profit after all of your pricing strategies have been put into place, it’s time to take a closer look at your operating costs. Are there any areas where you’re overspending? Could smart technology make your medspa more efficient and less reliant on manual labor? Are you paying too much for marketing campaigns that aren’t driving results? Finding opportunities to streamline costs can boost your profit margins without a change in service price.

• Packages and seasonal offers: Your clients’ priorities may change depending on the time of year, so promote accordingly. Summer is a great time for microneedling, hydrafacials, and injectables, for example; the winter holidays provide opportunities for gift card and package sales. Make it clear that these offers are only available for a limited time to create a sense of urgency.

Just as there’s no one-size-fits-all approach to self-care, there’s no single pricing strategy that will work at all times. Striking the right balance between profitability and client satisfaction is an ongoing process that requires research and careful planning. Stay flexible and you’ll find that sweet spot where you can keep clients happy while continuing to grow your business.