Maximizing revenues stay true to the marketing message spa

maximizing revenues and staying true
to the marketing message,
“where do I go from here?”
Prepared by Loren Stone

In setting out for planning a successful year and consequently multiple years serious due
diligence and effort must go into your efforts. As is referenced for this year’s topic each
year is a new road map in marketing and sales, and you as the driver must navigate the
cross roads to not lose direction. The more that you prepare ahead of time for this journey
the greater the success for the year with less obstacles. The goal is to avoid those pot
holes that appear out of nowhere and cost you more money and time. Unfortunately, as is
with any road trip you can do plenty of prior planning anticipating all hazards and
obstacles, but you must be ready to manage the unexpected.

preparation
In preparing for this marketing road trip you have to ask yourself many questions to
guarantee a thorough analysis of the environment, competition, and the business with all
its inner workings.

sample check list for planning the marketing road map:
1. Where are we going? A simple question, but have you challenged your team
to answer and support it? Whether you are taking a cross country trip that
involves renovation and expansion plans to improve the bottom line by 15% with
new retail, how are you going to get there and where is there? You should be able
to present a detailed plan of attack with specifics relative to a pricing model
yielding profitable treatments during peak times, staffing models for business
fluctuations, a competitive evaluation and where your product fits relative to the
pricing strategy.

2. Way Points. In navigating, way points are those designated indicators along the
way that help facilitate movement to your final destination. Those points are there
to guide you on that marketing road map. Some marketing way points:

a. Business, sales and marketing plan (appendix i).
b. Market analysis (appendix ii).
c. Zero based detailed sales and marketing action plan (appendix iii).

SOVEREIGN HOSPITALITY INTERNATIONAL SOVEREIGN HOSPITALITY MANAGEMENT SOVEREIGN DEVELOPMENT
P.O. BOX 5306, BRECKENRIDGE, COLORADO 80424 PHONE: (303) 800-6161
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d. Competitive comparisons for the year with a reduced weekly version
(appendix iv).
e. Pace report (appendix v).
f. Sales and marketing audit (appendix vi).
g. Call tracking sheet for monitoring conversion of business and source
(appendix vii).
h. Marketing campaign evaluation (appendix viii).
i. Yield management strategy.
j. Spa promotional packages.

This sampling of marketing way points are described in detail henceforth with an
appendix for reference. These tools are a MUST in preparing a successful
marketing road map. Additional sample way points for reference, but are not
included in this presentation (in no particular order):

k. Internet marketing plan.
l. 30-60-90-180 and annual action plan for each staff member and therapist.
m. Guest survey to measure results with implementation plan in place for
review, action and acknowledgements.
n. Weekly roll-up report. Examples: successes, areas for improvement, staff
accomplishments, update of actuals relative to budget, pace report,
changes in strategy, and YTD financials.
o. Various newsletters for in-house and repeat guests/clients, referral partners
and the solicitation of new clients.
p. Public relations outline.
q. Incentive referral program.


market analysis
A market analysis clearly defines the business environment, competition, and exposes
strengths and weaknesses for exploitation or adjustments. When approaching strategy for
the upcoming year(s) decisions should not be based on speculation or gut instinct, but
supported by raw statistical data for:

Decisions to drive profitability.
Adjustments/additions to treatment menus.
Pricing and packaging adjustments.
Identifying opportunities in the market in which to corner a niche or
capture new/additional market share.

market analysis includes:
As part of the business, sales and marketing plan:

Economic overview.
Market position.
Spa market overview/analysis.
Significant projects and issues.
Competitive overview/analysis.

1. Economic Overview
Outline those internal and external influences that impact your business. These could
include weather issues, the local or state regulatory environment, inventory supply
and demand factors in your market, increase or reduction of tourists/client base for a
particular reason, leisure demand, or other factors.

2. Market Position
Where your business is positioned within your market relative to your competition
and what strategies will you employ to maintain or change your market position in
20xx?) List any major competitors and their strengths/weaknesses.

3. Spa Market Overview/Analysis
Identify areas of opportunity within the spa market in the region. When studying your
market a concise overview of the spa industry is sufficient. In evaluating this market a
keen eye is necessary and an open mind for opportunities. It is assumed that your
competition has looked at the same facts and statistics, but there is always another
opportunity and growth area available. The industry trends are ever changing and
maintaining your knowledge base through organizations like ISPA can give you the
cutting edge. Do not take for granted that someone larger and with more resources
may have seen the opportunity as many competitors remain complacent due to their
overall position in the market place. Your analysis should include external forces,


projects and issues that may impact your business (hotels, spas, products, fitness,
etc.). The more detail the better from local area Chamber statistics that support the
assumptions of growth or change.

Your conclusions in this overview should provide supporting statements and
indicators for the primary sales and marketing strategy. The analysis breaks down the
demographics of who visits spas in your area and how this consumer fits into your
mix. These statistics support consumer trends and buying habits to spa treatments and
retail. This information allows you to profile that consumer into segments and
adapting this to your pricing model.

This can understandably involve a lot of work and time to detail this information. The
upside is once this is fully completed you are maintaining this information in the
coming years. No strategy is sound without doing your homework and knowing the
customer and how it relates to your business.

4. Competitive Analysis
A competitive analysis on local, state and regional spas that are comparable in
operations yields a wealth of information. This should include: reviewing treatment
menus, pricing models, packaging, amenities, staffing models and benefits. Once this
information is assimilated then a SWOT analysis (Strengths, Weakness,
Opportunities and Threats) can be created and opportunities clearly identified. The
bottom line is to know your competition and don’t play reactive marketing, but rather
proactive marketing.


business, sales and marketing plan
Every year, in preparation of your spa business, sales, marketing and budgeting process
due diligence must be taken on many levels. Earlier specific way points were mentioned
that assist this process. Included in this document are numerous appendixes for reference
in creating some of this information.

There are many rules of thought for preparation and execution of this material, but the
common denominator is to complete these outlines and maintain them. There is no short
cut on the marketing road map. If you want or need to take the express train to your
destination you can get there fast, but you will not see the things on the way that will get
you there more complete. There is no guarantee that the trip will be a success and a faster
method of transit should only be initiated in extreme scenarios (i.e. major delays in
opening or expansions, etc). A well thought out plan will make the trip enjoyable and
give you insight into make the correct decision when you come to those cross roads, so
you don’t get lost.

Additionally, whether you are an experienced marketer or new to the planning I
guarantee that this brief overview will give you a solid foundation or strong reminder of
what you may have chosen to let fall to the wayside.

business plan format
“A successful individual typically sets his next goal somewhat, but not too much
above his last achievement. In this way he steadily raises his level of aspiration.”
~ Kurt Lewin

This business plan format is intended to serve as a tool to guide you through a thoughtful
process as you develop your business plan and related strategies for the coming year(s).
The development of an annual business plan should continue to be a standard which will
be considered the key element of your business planning process in the future.

The intent has been to utilize a format which is simple, complete and appropriate for your
business. The goal is that a plan is thoughtful, clear and complete, but not necessarily
lengthy nor verbose. Ideally, this will provide you with the useful “road map” for the
coming year, the success of which can be continually measured and appropriately altered
throughout as needed to accommodate the business environment in which you operate.


sample budget business plan format
Business Plan (appendix i).
Marketing Plan (appendix i).
Marketing Analysis (appendix i and ii).
20XX Operating Budget (appendix i).
20XX Capital Budget (appendix i).
Most Recent Pace Report (appendix v).
Current Year Summary of Financials.
Any Other Supportive Information.


travel beacons
I am tempted to refer to a travel beacon as the colloquial example, ‘a beacon of light’, but
I tend to think of them differently with the marketing road map. In essence, along the
journey of developing your road map you have the opportunity to stop at rest areas. These
rest areas are beacons along your way that provide a chance for you to distance yourself
from the competition, and delivering a complete business, sales and marketing plan that
the entire team can get behind and drive together. I have illuminated some areas for
consideration with one crucial area, a yield revenue management strategy.

Yield management is the super unleaded fuel with which you can use to travel. You
certainly can get to your destination on regular fuel. But your marketing machine will be
running at its highest rpm’s and efficiently utilizing cash resources through yield
management, your premium fuel additive.

treatment menu pricing
You should conduct this detailed competitive pricing review at a minimum by your
business seasons. As an example, in a destination market your business will have an
average of two main seasons. I would instruct the director to deeply analyze the treatment
menu at least twice a year; comparing treatment menus between your business and the
top competitors; and any other applicable amenities and facility items. The weekly
competitive grid watches packaging and promotions mainly as rates normally remain
static in the market place.

Some sample questions you should be asking yourself, “Is my spa…”
offering the correct services for my clientele?
menu priced correctly for this market?
offering any services or amenities that separate it from the competition? What
services could I be offering that are different, but similar?
offering a signature treatment that separates me from my competition and is
complimentary to my theme?
needing to add an amenity, treatment or service to remain competitive in this
market place?
losing business to my competitors, because of a certain treatment or value added
item?
thinking out of the box…thinking extraordinary…thinking blue sky ideas?
aware of what we are doing right by our menu and services… and are we
capitalizing on this?


pricing
Depending on the situation and guest perception is what should dictate some of the
decisions with pricing strategy. You must always protect rate integrity whenever
possible. The advantage of this strategy is you will not devalue your product (retail or a
treatment) when you can discount on a package verses an individual item. The difficult
situation with discounting through packaging is that the overall value is considerably
more monetarily and this may not be perceived as a value to some customers. For
example, a $500 spa package discounted 20% ($100) is of greater value if designed
properly. This package may be offered during weekday or low volume times; thus, the
greater discount value. Perception is it still costs $500 which may not fit any of your
clients demographically. It is for this reason it is important to know your customer and
apply the pricing strategies accordingly based on that customer, your needs and their
buying habits. If care is taken to study this you can drive greater revenue at higher
discounts, but it must be applied at the correct time and with the right products.

Another fact to consider is that based on how you implement the discounting strategy it
can place greater value to the customer and the business. As an example, if you discount
a package by offering a credit towards future treatments, retail or other amenity (i.e.
lodging, restaurant, etc.) this discounting equates to less due to your actual cost. But to
the customer it is still a $XX value as a credit.

packaging
Each year a full spread of packages should be built covering all seasons, primary holidays
and special occasions. The goal should be to design packages that target specific markets
(pampering days, couples, special occasions, Mother’s/Father’s Day, honeymoon, etc.). It
is important to be aware of the value of your treatments in relation to profitability and
when they are being offered. Your premium treatments should apply only during
premium times. Do you know how much profit per minute each one of your treatments
brings to your spa? This is an important component for building and launching packages.
Another good idea is to build flexibility in packaging to allow the customer some options
within the package (i.e. choose treatment A or B).

Once the packaging is in place your team members should be trained and comfortable on
how to upsell at all times. Also, with these efforts you get valuable feedback from the
team to adjust the packaging along the way.

The media is always looking for an array of packages throughout the year. In addition to
the standardized packaging, get creative. Some packages should be designed just to bring
media attention for their uniqueness or originality.


pricing guidelines
There are various formulas to establish pricing guidelines for treatments, apparel,
jewelry/accessories, imprints, and gifts. The fundamental for retail is once you have your
established cost of sales guidelines you take the cost price divided by cost of sales%
which equals the retail price. With retail targets averaging 20% of budget this is an
important component in rate strategy to maintain and exceed budget. With treatments,
what does the market support?

The same types of questions apply as referenced in the competitive spa section. A few
sample questions:
Did you perform a competitive pricing model on similar items?
Did you perform the litmus test? No matter what the competitive data
states does the consumer accept the perceived value and the price to the
product offering? If not change the pricing strategy or the product.
Where is your spa priced in comparison to the market place? Do you want
to be in the upper or lower tier of that competitive set? Regardless of
where you want to be does your complete product and services support
that decision? All too often I see businesses priced at the upper end of the
competitive set, because that is where they need to be in supporting their
budget. I have no disagreement to drive the upper tier of budgeting and
within the correct market place, but does your sales and marketing strategy
take your business to this point. Does your strategy support this pricing
model? This is always a difficult topic and one that a director or manager
is nervous to challenge with ownership or their superior. If the due
diligence has been the supporting sales and marketing strategies will
support or reestablish the budget parameters.
When determining pricing strategy I will look for competitors that are so
off the charts that they are a false competitor. There is always one in the
market place, so do the research to support what the pricing model is for
you and not what an unsupported competitor states the pricing guidelines
should be. At the same time there may be a competitor that is at the top of
the food chain and with a pricing model that is lower. How is this
competitor maintaining its customer base?
Determining where your spa falls amongst your competition helps with
developing the pricing strategy in your revenue/maximization strategy
(yield or RevMax). As an example, if you are on the upper end of the
competitive set, your spa should be more inclined to adjust rate to
fluctuation or occupancy demands. While lower end business in the
competitive set is less likely to adjust rate at all and remain static.


yield management
Many of you may read this material and it will dawn on you that you are implementing
some form of yield strategy currently. My guess is you have not put a name to these
strategies and are not fully implementing the intricacies to establish consistency. This
brief outline provides a simple review of yield for implementation. The level of detail and
analysis is ten-fold of what I will explain, but this will get things started.

In beginning to understand yield management, the more past historical data and
forecasting you have with the recording of current data the better your decision will be.
For example, the tracking and pace reports capture current trends to forecast and adjust
daily, weekly and monthly rate strategy. This recorded data establishes a base line to
compare against future data. When reviewing this information in your yield meeting
(recommended weekly yield meetings during peak season, and bi-weekly during the
slower season) it provides a basis in formulating strategy and making rate/packaging
decisions. The more educated your decision is the more successful you will be in the long
run. We try to avoid the phrases ‘our monthly actual last year was great’, but you have no
idea how and where that business came from.

Yield or rate management is the fuel that drives the sales and marketing decisions. The
difference between missing, meeting or exceeding budget can be derived through yield
management. This type of strategy is the means by either restricting or offering
treatments based on demand to maximize profits. It is important to determine profit per
minute as part of an evaluation. What are the more profitable treatments per minute in
order to maximize yield decisions?

It isn’t uncommon to fluctuate or combine yield strategies based on your market mix and
seasons. A weekday booking pattern may be an occupancy strategy, while your peak
weekends are following a price strategy. The promotions and treatments should be
aligned with the correct yield strategy accordingly. As an example, your higher premium
treatments that are more profitable should be allocated during the peak pricing strategy
times. A yield strategy includes: past historical data, determining occupancy by treatment
room, and being aware of the profitability of each treatment. A yield strategy is
determined at the beginning of a budget year, and if the strategy needs to be adjusted then
you reforecast and complete the due diligence again to support an overall change in yield
strategy.


A yield strategy can be narrowed down into three types: 1) occupancy strategy; 2) a mix
strategy; 3) price strategy.

occupancy strategy
Increasing and decreasing occupancy by demand and controlling loss. The main goal is to
drive occupancy through rate and packaging. In turn, rate and packages are value based to
drive occupancy and not solely rate. Your profitability is driven through a high volume of
treatments.

This yield strategy is common on multiple levels of inventory management from airlines
and lodging to spa.

mix strategy
This strategy determines when each treatment is best sold to drive profits and controlling
this information to maximize revenue. As mentioned earlier a higher profit treatment
should be featured and driven when it is most effective (peak times). This can be a
difficult strategy to maintain, but the easiest approach is to not discount or promote less
profitable treatments during the times when peak treatments are most effective. Another
indicator for a mix strategy is when occupancy is relatively moderate. For example,
during peak times you would be implementing a price driven strategy.

price strategy
This type of strategy is typically managing ‘up’ in pricing for treatments. During peak
times you promote your more profitable treatments and manage rate up according to
limited availability. It is becoming more acceptable to see rate strategy similar to what
the consumer is accustomed to with any other product in demand. As the product
becomes limited to the consumer the pricing goes upwards. Sovereign Hospitality
successfully manages rate increases by increasing profitable treatments upwards as
availability becomes more limited. It will be a marginal increase to evaluate market
resistance, but the return can be quite significant to the budget’s bottom line.

The creating of rate levels for treatments is also part of these strategies. When a decision
is made in a yield meeting to increase rates to a higher level this is implemented through
a simple manual system. The ‘thinking’ portion has been taken out of the equation for the
front line and they sell the new yielded rate. The call tracking sheets monitor rate
resistance with this rate increase to either increase rates more or adjust accordingly.


mechanics to yield management
These are the items you should know and be prepared to do with your yield strategy:
What is the goal of my yield revenue strategy? To grow new market
share? To take a piece of the pie from another competitor? Maintain my
position within my market, etc.?
Past historical data and forecasted information.
Budget actual.
Are you aware of the increase/decrease in demand that is forecasted for
the new year?
Pace report weekly.
Monthly tracking call sheets, conversion, abandonment reports.
Competitive information on treatments, services and products.
Occupancy percentages by month per treatment room, revenue by month
Profit by minute for each treatment (there are various ways to calculate
this information and you should evaluate your budget accordingly). This
type of analysis allows for a level field for comparison of treatments.
Separate treatments from the profitability minute exercise in category one
(lowest), two and three. You can re-name these as you see fit. As an
example, the Swedish massage is commonly grouped into the lowest
category as it is common to all destination/day spas. Also, note that
categorizing your treatments may vary by season.
Is your entire team trained on what treatments fall into each category and
when those should be sold? The lower treatments during slower times, etc.
It is vital that your entire team realize and endorse a yield program. One
person can unravel a yield strategy during a shift.
Have you identified fences (reference term for yielding by a barrier to not
sell certain periods) to restrict the sales of low or high value treatments
during the incorrect demand period? Always handle a fencing scenario in
a positive way. Example:
o “I have confirmed you at our XYZ weekday treatment rate, which
allows me to offer a significant savings of $129, but due to this
highly discounted rate the treatment is non-refundable (EXAMPLE
OF A FENCE) at the end of the call today.”
Have you strategized how to implement a plan to only sell your premium
treatments (high value) during certain seasons and periods of time
according to historical data? If you don’t have historical data then being
able to identify when this opportunity presents itself and react accordingly.
Identify patterns and trends from data.
Does the prepared menu, packages and promotions for the year correlate
to the revenue strategy and implementation plan? If I am pursuing an
occupancy strategy then does my menu offer enough of category one
treatments to support this strategy?


For example, are the discounted/lower treatments and higher profit
treatments being promoted during with the correct strategy (occupancy)?
Do you have a clear understanding of your customers and how they relate
to profitability with the treatments? Example, your group business
typically chooses a category two set of treatments, but the business is
being booked during the peak time and when category three is dominant.
What is your strategy to identify this business and implement the correct
yield strategy? Do some segments of business generate more business
during a particular season, and has this been reviewed and addressed?
Yield scenarios to deliberate on:
o Stricter cancellation policy on category three (highest) treatment
times.
o Advance purchase rates or promotions that are non-refundable.
o Standing special rates or promotions that are highly restrictive.
Example, week day pattern.
o Spa resort fee.
o Upset customer or inquiry. Train staff to not immediately offer a
discounted or promotional rate.
o When referencing rates to a client during a lower category, one,
reference the higher demand category. “Normally the rate for that
treatment is $185, but since you are visiting us during our weekday
promotional time the rate is $129.”
o Refer to rates as being ‘sold out’ verses that they are no longer
available. “We sold out of the $185 XYZ treatment, but I do
have…”
o Know your competition. As suggested regular competitive reports
are to be maintained, and all team members should have access to
this information. When they have a potential client refer to a
competitor rate they are armed with the knowledge to handle this
call as you have instructed.
Sovereign Hospitality has signature manual yield systems for daily
calendar and rate management. You will need to devise a system of rate
and daily management.


spa audit
With each department Sovereign Hospitality has a detailed audit sheet to review the
departments operationally and functionality. A sample sales and marketing audit is
included in the appendix. Use this sample tool to develop your own complete roadmap of
the spa department.

Some additional points of interest:
Annual SWOT analysis of your competition for the business plan.
Annual detailed sales and marketing action plan. Maintained and adjust as needed
and in most cases daily or weekly.
Seasonal treatment menu, pricing and content. Recommended semi-annually.
Audit on cost of sales for retail and every treatment. Recommended semi-
annually.
Annual training program. Monthly calendar outlining training regimen.
Guest survey program with plan for review, action and acknowledgements.
Posting of weekly, monthly goals by therapist, and for monthly budget. This
information should accompany customer service score goals. If you do not have a
scoring system then create a customer service goal. For example, enlist receiving
XX amount of comment cards weekly.
Incentive program and tracking of performance of team individually.

The level of detail and information to review can seem overwhelming and it is at first. It
is important to adopt this type of program, identify the information and areas of
concentration and slowly address them through yield revenue strategies. Over time you
will find your level of understanding growing exponentially complimented by the
sophistication of your decision making increasing.

This information is just a limited outline of the questions and items to implement and
review. You need to take the time, initiative to learn, and utilize the resources available to
implement a program.

This document contains information from Sovereign Hospitality International, LLC, Sovereign Development, LLC, Sovereign
Hospitality Management, LLC, Stone International Holdings, LLC, which may be confidential or protected. If you are not the
intended recipient, be aware that any disclosure, copying, distribution, or use of the content of this information is prohibited.
Marketing Roadmap – How to Navigate the Crossroads and Never Lose Direction, a trademarked
work product of Stone International Holdings, LLC.

Copyright © 2010 Loren Stone. All rights reserved worldwide.


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