Townsville Barber Shop Manager Throws Away $702

Times Are Tough In Townsville?

First the story (briefly).

This morning I decided I needed a haircut.  I only have so much hair now, so recently I have been going to a convenient barber, that is near the coffee shop I visit sometimes.  The benefit of a barber is you can usually not make an appointment, and can get a tidy up that suits my time frame rather than my hairdressers.

I used to go to hairdressers, but the event usually required a special trip, which added to the time needed.  And often even with an appointment, I would be asked to wait.   So, with the decreasing amount of hair, and less difference between a great haircut and a haircut – I decided to go to a barber shop.

And it was ok.

Anyway, this morning I went to the barber shop at Fairfield Shopping Centre.  There was a sprout of hair on my head at a gawky angle – so I made a special trip (it is 5 mins away).

As I approach the barber shop, I see that the gate is still mostly across their shop, and the manager and apprentice are standing around chatting.  “Great!” I think – I will be first.  As I reach the gate the managers asks “Can I help you?”.  I say “Yes, hi, I am in a hurry and would like a trim.”

“No, we are not open.  We open at 9, and it is only 5 to 9.  Can you come back in 5 minutes?”

“Um,  No. I won’t.  Good bye.”  And left to walk to the hairdresser at the other end of the shopping centre.

Now this particular barber shop has cut my hair before twice.  It takes only minutes to cut my hair, and on the previous occasion the junior employee did the job, and the time before that the manager did it.

There are several business lessons in this story.

1.  I get a haircut every 4 weeks or so.  That is 13 haircuts a year.  It costs $27 for a barber haircut there (and you can only pay by cash.)  That is $351 per year, assuming no upsells or cross-sells.  I would likely go there for 2 years, so total value hits $702.  If we assume haircut takes less than 15 minutes, the labour cost will be less than $6 each visit.  So gross profit from my little bits of hair is $546 over 2 years.
2. Lets not count anyone I might refer to them, which would multiply this value.
3. Near as I can tell, there is no external marketing by this barber shop group.  They rely on foot traffic for leads.
4. It is likely the manager will have a “story” about why I should go away and come back in a few minutes.  Some vital things need doing in the seconds before opening.
5. What could she have done?
   1. Interact with me.  Say “we are still getting ready for the day, but come in and take a seat and we will be with you in a jiffy.”
   2. Recognize me.  She seemed to remember me.  She could say “Welcome back.  Ready for you in a tick, here is a voucher for a coffee (value about $3.80) from the coffee shop about 20 metres away that is open.”
   3. Been ready for business early.
   4. Know the average lifetime value of a customer.
6. This would have been my third haircut there.  As a general rule, if you can get a client or customer to buy off you three times, they are in a safe zone where they will continue to buy off you for a long time.  It is one of the reasons that EVERY business needs to have a SECOND purchase offer for a new customer, and then a THIRD purchase offer.  Think about it.  Once you have been to a place three times, you are comfortable – you have figured out the system, you know where to sit, how to order, etc.
7. The only marketing for this barber shop that works on me is that it is/was convenient.  There is nothing special or unique (in ways important to me) about them.   The pricing is not competitive.  The staff not overly skilled or charming.  If I was asked why I went there?  “Because it is convenient and I don’t need an appointment which wastes my time.”   When faced with a perception that I am completely unimportant to them, in the absence of any weight to their relationship with me, that feeling was sufficient to end it.

Pretty riveting story, ay?

Now, about YOUR business.  How certain are you that your team is not spilling clients out of your revenue by doing similar things?  How is your standard greeting quality when your clients or customers visit?  Do you have a PROCESS that brings a new customer into your herd by systematically encouraging the first three purchases?

Do you know the average lifetime value of your customers?  Do you know that number for each of the categories of your business?  If a barber shop customer is worth $700 over two years, how much is he worth if you keep him for four years?  Or if you bribe him to bring his teenage son?

If you have not made these fundamental calculations – you are flying blind with your strategy.  You cannot effectively budget for marketing.  You are relying on intuition and luck.  That can be ok for a while, but over time MATHS is what drives your profits.  And the eventual value of your business when sold.  (most businesses do not “sell”, they close.)

Cheers

James Hooper