Subscription vs. Pay-As-You-Go: Which Model Boosts Revenue for Salons?

The goal of any salon owner would be to offer great services. However, is that enough? Well, no. To succeed in the long-run, a well-defined and comprehensive plan is required. You can also refer to it as a salon revenue model. This is what will determine your profitability in the future. As a salon owner, a critical decision you need to make is what kind of pricing model you want to offer your customers. This will not just impact your revenue but also change the way they interact with your business. Times have changed and traditional businesses are getting obsolete faster than ever. Thus, you need to choose between a subscription-based business model or a pay-as-you-go (PAYG) model for your salon customers.

What is a Salon Revenue Model?

Before we delve deep into the different kinds of salon revenue models, let’s understand what this term means. As the name implies, a salon revenue model is a complete framework of how a salon generates revenue. When you open and run a salon business, your source of income is not just dependent on one source but several sources. For instance, you generate revenue via services and retail sales, gift card sales, memberships, events, and so on. When a client visits your salon to avail a service, the price they pay for it depends on the kind of salon model they choose. Those on a subscription-based business model tend to pay much less than those on a PAYG model. Both these models have their own pros and cons. Before we start the comparison, let’s understand what each of these models stand for and how it will benefit your overall salon revenue.

Revenue Models for Salon Business

• Subscription-based Salon Revenue Model

A subscription-based business model for salons needs no introduction as such. Customers pay a recurring fee on a consistent basis (monthly, quarterly, bi-annually) to receive a product or service. A fee is paid for a package of services or discounts. The pre-determined fee is charged by the salon for a contracted period. It is not done per transaction. Once a client pays a fee, they can enjoy services cashless. One might think that this model is only applicable for a newspaper or magazine subscription. However, it is even applicable for the beauty business. In fact, salon owners swear by this model as it promises recurring income. Even during slower periods, such a revenue model will ensure stable income. A salon subscription model is similar to salon memberships. As a salon owner, if you have a SaaS subscription to manage your salon business, you can seamlessly sell memberships using the specially-designed membership feature.

Pros:

• Recurring Payments: A customer tends to pay the same amount at different intervals for the subscription. This guarantees a fixed income for your salon business as long as the clients keep renewing their subscription.
• Flexible Model for Customers: It’s ideal to attract occasional users or new clients who are resistant to commit.
• Enhances Client Loyalty: When customers participate in this kind of a model regularly, it generates long-lasting relationships.
• Easy to Implement: A subscription-based model is easy to implement. No complex planning is required. Billing too is pretty easy as there will be a one-time cost involved which will be common for all.
• Value Add: You can attract clients towards this model by offering other adds-on or advantages. For instance, discounts, access to events or freebies. Clients are more likely to purchase a subscription when they see some kind of value in it.

Cons:

• Continuous Marketing: A subscription-based model may require you to engage in aggressive marketing. This is because you need to convince people to sign-up again once they’ve unsubscribed.
• Customers are Paying too Much: Sometimes, a customer may be paying too much for a subscription than the cost of an actual service. It may be a win-win for your salon but not always for your customers.

A subscription-based business model is ideal for new salons that are still building their client base, low-frequency services (hair colouring) and seasonal markets.

Sample Subscription Plan for your Salon

Subscription Plan Name: Monthly Glow Club

This is ideal for clients who visit your salon regularly to avail hair, nail and skincare services. They’re likely to purchase your subscription plan if they find any kind of VIP perks.

Plan Inclusions:

• Blast dry or blowout
• 10% off on retail products
• Priority booking window
• Free-birthday add-on
• Rollover 1 unused service per month (expiry after 60 days)

This kind of model is ideal for low maintenance beauty lovers. The validity of the subscription plan can be 30 days and can be priced at Rs. 1,499/month.

Make sure the terms and conditions of the subscription are listed out clearly. Let the client know that it auto-renews every month unless they cancel it prior. The only way to boost the value of a subscription plan is by providing value.

• Pay-As-You-Go (PAYG) Salon Revenue Model

Every salon owner is familiar with this revenue model. It’s simple and straightforward. It refers to a model wherein a business charges for the service they provide. Hence, it is referred to as pay-as-you-go. It is a highly flexible payment structure which allows salon clients to only pay for what they use. This model is ideal for those who are careful spenders or want to watch where they are putting their money. A revenue model isn’t just about creating value but providing value. It is also referred to as the fee-for-service salon revenue model. This approach is particularly ideal for salons as they provide on-demand services. It is also a customer-friendly model.

Pros:

• No Barrier to Entry: This kind of pay-as-you-go model appeals to a broad audience as there is little to no barrier to entry. Unlike a subscription-based model, this requires no commitment. If your aim is to attract seasonal or occasional clients, the PAYG model will definitely work.
• High Flexibility: Since it is a commitment-free model, customers can adjust their spending as and when they like. For instance, a client can avail a blowout or manicure only when they feel like it. They are not commitment bound.
• Transparent Pricing: Subscriptions usually charge a lump sum. Clients don’t know what the real price of the services are and what they are really paying for. In PAYG, the cost of every service is transparent. This helps you win the trust and confidence of the customer.
• No Billing Headaches: With subscription-based business models, tracking is of utmost importance. A salon manager or salon software will have to manage recurring billing or subscription tiers. Pay-as-you-go is nothing but usage-based billing. Clients are only billed for the services they avail.

Cons:

• Difficult to Predict Revenue: PAYG leads to revenue volatility. Since bookings are hard to predict, the income fluctuates. Once a customer makes a purchase or avails a service, you benefit from their sale right there and then. For them to keep returning, you will have to implement aggressive marketing strategies. Only this will help you retain them in the long-run.
• Higher Marketing Costs: Retaining clients with this model is tough as they’re likely to hop from one salon to the other. This will require you to put in more effort as far as marketing is concerned. Clients too will have no incentive to return in this model.

Small salon businesses can find value in PAYG. It also allows them to scale in the future.

Which Model Boosts Revenue for Salons?

When it comes to revenue models, making a decision can be difficult for a salon owner. Although, both these models help boost revenue. No salon will only have a subscription-based model. This is being too hard on the customers. There is no right or wrong answer here as it all depends on a number of aspects including payment structure, customer experience and overall business impact.

A subscription boosts revenue if a salon has repeatable, routine services whereas PAYG may be better if your clientele is seasonal. Instead of choosing one model, it’s best to go with a hybrid option. While subscription is ideal for loyal clients, PAYG is also essential for casual, erratic clients. As a salon owner, when you want to build a recurring revenue stream, it’s best to offer both models.

While these are the most popular salon revenue models, there are other models too which your salon can explore.

Other Salon Revenue Models that Maximise Profitability & Growth

• Gift Card Sales

Every salon owner looks for an additional revenue source. A fool-proof way to increase your revenue is by selling branded gift cards. You can sell them directly on your website and on your salon booking software. With a centralised system in place, you don’t have to worry about tracking gift card sales and usage. All your data can be stored in one place and you can seamlessly track which gift card was redeemed when and by whom. When a gift card is created or sold, it also gets synced to the client’s profile.

• Retail Product Sales

When you walk into any salon, you’ve probably seen a wall that is full of retail products. Well, retail in salons is a sure-shot revenue model. Your clients too want to own professional salon products. By creating a retail space in your salon, the products can reach them quickly and easily. Make the display attractive and offer deals on retail bundles. Training your staff on retail is quickly important as they can cross-sell or upsell during a service.

Final Word

It goes without saying that every salon owner wants to boost long-term revenue. Choosing which model works best solely depends on your business goals and the kind of clients you have. If you’re only sticking to the traditional salon revenue model, your business will cease to exist. In order to survive and boost your revenue, you need to tap new opportunities such as subscription-based models. Instead of doing away with traditional models, introduce new models. This way, you will be assured of a steady cash flow and will be able to build long-lasting client relationships.

As a salon owner, if you’re worried about creating and tracking subscriptions, fret not as Salon360App, salon software has your back. It helps salon businesses thrive in today’s digital landscape. Request a demo.