Each step in a spa product’s production process adds a piece to its price
By Vivienne O’Keeffe A.A.D., P.E.A., C.I.B.T.A.C.
Published in Pulse magazine’s July 2007 issue
The importance of retailing to the success of any spa operation cannot be understated – efficient and effective retailing in spas can create a vital profitability lifeline while reinforcing and supporting the guest’s in-spa experience with at-home products and procedures.
Today’s spa consumers are very savvy individuals who appreciate intelligent design and effective products. They are astutely educated consumers when it comes to products and use the internet to research the known scientific data – benefits and results – of specific ingredients such as Vitamin C, for example. In my 21 years of professional experience in the spa industry world-wide, I see the internet as having an enormous effect on the industry; consumers are often more informed about ingredients and new treatments than the average spa professional. This creates a stress for the uninformed spa technician, with consumers quickly losing confidence in the guidance provided. Having confidence in the product your spa sells, and understanding the reasoning behind the price you are selling it at, can make all the difference in creating confidence and closing a sale – especially when consumers question the price point of products.
Many factors contribute to the price point of a spa product. To determine the final price of a product we need to start with the origins of the product – the sourcing of ingredients. Sourcing ingredients is a vast subject – for example, is the ingredient naturally occurring, bioengineered, or synthesized? If naturally occurring, how is it extracted; is it cold pressed? Is it certified organic or fair trade, wild crafted, etc? Raw ingredients typically used in spa products are sourced all over the world as different climates and soil types produce different varieties and sought-after qualities: for example, mass produced lavender oil will cost much less than a high-quality, natural, essential oil which is certified organic and brought over from Europe. Similarly, synthetically produced lavender oils would cost even less. Further to this, an enfleurage extraction method is often used for delicate flowers such as rose and jasmine in order to faithfully acquire their essential oils, which is a more expensive and time consuming process than synthetic routes.
Both Cord Coen, creator and president of Zents products, and Christine White-Stanton, the owner of Scandle massage candles, are good examples of manufacturers who go to quite some length to source quality ingredients for their non-mass-produced products. Cord traveled to England, Bulgaria and Croatia, personally sourcing the best lavender, peppermint and rose oils for his hand-crafted line. Christine similarly sources from abroad, stating “many of our components (i.e. essential oils, soy beans) are imported and are extracted from organically grown plants, which definitely adds to the price.”
New “scientific breakthrough” ingredients can cost more to purchase because of the research and development required to formulate them. With the advancements in technology and research, a whole new frontier has opened up for the skin care industry producing more effective targeted products designed and formulated for very specific purposes. Today’s intelligent consumers are seeking products that deliver results; gone are the days when it was sufficient for a moisturizer to feel good – now it needs to deliver on many other result-related levels.
Manufacturing plant – just as sanitation is imperative in the spa operating arena, it is equally an essential component of any cosmetic manufacturing process in the laboratory. If a product producer is making the product in their home kitchen, it exposes the spa to unnecessary risk due to the lack of proper facilities, procedures, and standards. A quality manufacturing facility is a costly investment and the highly-specialized equipment used in the production of skincare products is very expensive. Different laboratories utilize different manufacturing processes which yield distinct formulations adding to the level of sophistication of the product and the quality of the final formulation.
Formulation stability testing and quality control – quality control (QC) is a procedure or set of procedures intended to ensure that a manufactured product adheres to a defined set of quality criteria. In developing products, quality assurance (QA) is any systematic process of checking to see whether a product being developed is meeting specified requirements and is consistent with past batches of product. Natural ingredients and colorants can vary from season to season and indeed from batch to batch. Consistency and quality control of formulations and products are very important in product production, as variation is the enemy of consistent quality and can cause instability. This can be very disconcerting for the repeat user of a product. A quality assurance system increases consumer confidence and trust in the brand and to implement all of this takes time and money on the part of the product manufacturer. Examples of QA standard testing would be organoleptic testing for color, texture, smell, pH, viscosity, specific gravity and microbial content.
Angelica Gilbreath, Sales Executive for Oka B spa shoes (which claims the only spa shoe produced solely in the USA and manufactured on-site at their corporate headquarters outside of Atlanta, GA) noted that “this commitment (to maintaining the operation stateside) comes at a price. It’s no secret that domestic labor is more costly than foreign production, but the company looks at increased overheads as an investment in quality.” She further notes that the company’s adherence to strict quality control practices throughout the manufacturing process results in a “superior product”.
Clinical testing trials to evaluate the effectiveness and safety of products by monitoring their effects on large groups of people can add to the price of a product as the trials need to be very carefully monitored and documented in order to obtain effective results.
Packaging & labeling – we are all keenly aware of the fact that an attractive presentation stimulates the consumer’s interest, particularly in the spa boutique area where product or merchandize is not always accompanied by prescription or suggestion selling. We have all had the client who will not buy a product because the color of the jar clashes with her bathroom. Even in this era of environmental awareness spa goers love to gift beautifully packaged and presented products. The Packaging components and materials selected directly affect the wholesale product price; a glass jar is more expensive than a plastic jar and the weight of the glass increases protective-packaging costs, handling time and shipping costs for the manufacturer/distributor. Some companies will select artisan blown glass to embellish the luxurious sensuous experience of the product, such as the perfume bottles from Milan used in the Zents brand. Packaging is not always merely aesthetic; glass is a necessity for ingredients such as pure essential oils and certain formulations requiring specific protection from the packaging, as in opaque packaging which helps prevent degradation of the light-sensitive ingredients found in botanical oils.
Technical documentation is very important for today’s litigious environment and for educated consumers demanding that their aesthetician / product specialist be an expert on the product ingredients and how to use the product effectively. A well written product technical manual will increase front line staff’s confidence in recommending the product and thus impress the spa consumer with a patently high standard of staff professionalism and competency.
Technical training on site or at the location of the product manufacturer/distributor: – training is essential for correct product recommendation and application. Experienced technical trainers inspire confidence in technical staff and once that level of understanding is triggered the technical and front line staff feel comfortable suggesting the product and service. There is an associated cost attached to providing technical training, whether it is on site or at a designated location. Generally speaking, technical training is carried out at the expense of the manufacturer or distributor of the product – all of which is reflected in the products price. Without training, most staff will not understand the difference between a $65 cream and a $350 cream. Technical training also needs to be updated to keep the spa team focused on and au fait with the latest information on the product line. Technical training is imperative to protect and ensure success for the spa as well as for the manufacturer / distributor. Technical / phone support is important, particularly if you need to take care of a client who has an allergic or adverse reaction to the product / treatments. Most quality manufacturer/distributors provide technical support to help the spa facility address the unique needs of their clients and assist the spa in addressing specific issues. Qualified and experienced technical support is invaluable in building a spa business and costly for the manufacturer/distributor to provide.
Desired market position for the product: -mass market, mid market or high end? – Mass market products are produced for consumption in large numbers, typically products sold in drugstores and supermarkets. Mid Market – the vast majority of products produced fill this sector of the market. High end products – refers to the most sophisticated, and typically the most expensive products on the market.
Market positioning for products, especially higher end products, require careful selection – as price in many cases will help determine positioning. For spas looking to place a reasonable markup on high-end products and still maintain that products’ competitive edge against shelves filled with less expensive products imported from countries where labour costs (and quality control efforts) are less than home-grown produce, Mary Leber, owner of Beauty Prophet LLC, a brand development and cosmetic products distribution consultant out of New York State, suggests buyers making this decision should ask a question: “Is the product of good value to the consumer? If you can answer yes, then you have made an excellent purchase for your clients and they will reward you with repeat retail sales and loyalty.”
Competitor prices within the niche market – Ada Polla, President of Alchimie Forever LLC, who manufactures and imports products from Switzerland, has chosen to sell only through niche distribution channels such as high end spa and medical offices – all of which influences how she prices her products. Ada is also very much aware of what is going on around her in the marketplace stating that “Other competing lines also influence how we price our products.”
Brand awareness and marketing activities – brand awareness increases the spa consumer’s recognition of the brand and we all have experienced the Oprah effect. In today’s celebrity – obsessed society having a high profile individual endorse the product helps elevate positioning. Building brand awareness and directing marketing activities to specific target markets drives consumers into spas; for example consumer educational websites designed to educate consumers and drive traffic into specific spa locations where the consumers can purchase the product or treatment experience. This benefit and commitment is an expensive endeavor for the manufacturer/distributor and needs to be factored into the wholesale price which directly affects the recommended retail price. Also, promotional materials provided such as brochures, postcards, shopping bags, samples and gift – with – purchase promotions all add to the wholesale and retail price.
Margins – margins have enormous influence upon the final price of a retail product; the margins applied by the producer of the raw materials, the margins the manufacturer applies to the formulated product, the margin the distributor of that formulated product applies when selling it to the spa and the final margin the spa then applies to that product when selling it to the consumer all add up to creating the final retail price. Mary Leber observes that when a company determines pricing for their products “Some brands have very low margins – and some brands have considerably higher margins. The production costs for brands that have a small distribution can be an extremely high percentage. The larger a brand becomes, the more possibilities to pass on those savings to consumers – which is something that most savvy marketers will do because it broadens the market of potential consumers able to afford the brand. You can be sure that when a brand is very affordable – it means the company has made a decision to forego some margin.”
The suggested retail price is the price recommended by the manufacturer/distributor with the intention of upholding consistency for the consumer in the marketplace. Some prestige brands will prevent products being discounted. Some spas and resorts are in the admirable position of having a captive market and can choose to price the product above the suggested retail price, as their specific market can bear a higher price. “From experience several resorts will mark up our product more than 50% to 75% because of the captive market they possess” states Angelica Gilbreath for Oka B spa shoes.
If a manufacturer/distributor has invested a great deal of time, resources and expertise into developing a unique formulation, the price point may be positioned higher because of the technical innovations involved and also the R&D investment incurred.
Putting price before quality in selecting retail products for your spa can have a negative impact on your bottom line and upon how your business is perceived by the consumer – cheaper ineffective products can cause your spa brand to lose sacred trust and integrity with the spa consumer. A clearly defined pricing concept and philosophy is critical for any spa business intending to be around long term and responsiveness to the consumers needs is what will keep a spa business competitive. Select products and price points that appeal to, and are in line with, the demographic makeup of your target market.
Vivienne O’Keeffe, A.A.D., P.E.A., C.I.B.T.A.C., President of Spa Profits Consulting Inc., has earned an international reputation as an expert in designing successful spa concepts. She specializes in working with owners to create profitable spas. As an international consultant she is highly skilled in developing unique product and treatment lines, as well as training programs. Vivienne has studied and trained extensively in the beauty and well-being arena and is a member of ISPA, Leading Spas of Canada (for which she won an Outstanding Industry Service Award in 2001, 2005 and 2012) and the Institute of Management Consultants USA (IMC USA). She is also a published author, having written a wide range of articles on developing and running a successful spa. Spa Profits Consulting Inc. is the only SpaExcellence certified consultancy in North America, and is committed to setting the standard for quality, successful spas on a global level. For more information call 604.921.6245 or email