Did you know that approximately 2.4 billion dollars are lost each year in the hair and beauty industry worldwide due to no-shows and cancellations? It’s a scary statistic. That’s why ensuring clients show up to their appointments is crucial for maintaining a steady cash flow and avoiding financial losses.
Common strategies for preventing no-shows and cancellations for hair and beauty salons are taking deposits or charging cancellation fees, but which one is better for your salon or spa?
We cover the benefits and risks of each, and which one we believe is the most effective for salons and spas based on data.
The benefits of taking deposits for salons and spas
Clients are more likely to show up
When clients pay a deposit at the time of booking their appointment, they have already invested in the appointment, making them more likely to show up. This significantly reduces the likelihood of no-shows and last-minute cancellations.
Our data shows that salons that require 100% deposits see a 29% reduction in cancelled or no-show appointments on average compared to those that don’t take any deposits.
Immediate cash flow
Deposits provide immediate revenue for your business, improving your cash flow. This availability of funds helps in managing day-to-day operations more efficiently, as instead of waiting for someone to show up for their appointment to get paid, you’ve received part or full payment upfront.
Clients spend more after paying a deposit
When clients have already paid a deposit, their final bill seems smaller. This encourages them to spend more on retail products at the end of their service. Kitomba customers who take online deposits see a 2% average increase in client spend and a 9% increase in retail spend.
Deposits reduce the risk of chargebacks
A chargeback is when a client disputes a transaction, which is a costly and time-intensive process for business owners. By charging a deposit you are taking payment up-front to secure a booking, which is less likely to result in a chargeback.
Automation and convenience
Taking deposits for bookings made online can be automated if you use a salon software system like Kitomba, making the process seamless for both the salon and the client. Learn how to set up deposits for Kitomba Online Booking here.
Shows your salon’s value
Requiring a deposit shows professionalism and indicates that your business is in high demand. It also communicates to clients that you value their time and your own, enhancing the overall perception of your salon. It also becoming standard for securing services these days; you often can’t book a table at a restaurant or a physiotherapy appointment without paying a deposit, so clients are used to it already.
Risks of taking deposits
It may deter some clients from booking
By requiring a deposit up front, a common fear from salon owners is that it will scare people away from booking. This may be the case for some potential clients—often the time-wasting kind who are not serious about committing to their appointment with you.
For most salon owners, these are not the type of clients they want in their business anyway.
Benefits of charging cancellations fees
Convenience for clients
If clients don’t need to pay a deposit to secure their booking and instead will only be charged in the case of a late cancellation or no-show, this makes the booking process smoother.
Clients are more likely to show up
When a client knows they will be charged a cancellation fee when booking they are more likely to show up because they know that they will be charged otherwise. This causes fewer disruptions to the salon.
Risks of charging cancellation fees
Negative client experience
Charging cancellation fees after a client hasn’t received a service can lead to a negative client experience. For instance, Jill was a loyal customer of a beauty salon for two years and she had to cancel within 24 hours due to an unforeseen circumstance. The salon charged her credit card her full appointment amount. Jill never returned to the business again because she felt like she paid for nothing. However, when Jill had pre-paid deposits for services she couldn’t attend, she said it wasn’t as bad because she had already parted with the money in advance to secure the booking.
In short, collecting deposits creates a positive experience, while charging cancellation fees to credit cards afterward can damage client relationships and the salon’s reputation.
Clients may not want to pay
If you charge cancellation fees there is a risk that a client refuses to pay.
Risk of chargebacks/disputes
A chargeback is when a client disputes a transaction, which is a costly and time-intensive process for business owners. If you charge cancellation fees you face the risk of clients disputing the transaction.
Time-consuming process
Charging a cancellation fee after the appointment has resulted in a no-show or cancellation takes time and effort. It involves contacting the client, processing the charge, and potentially dealing with disputes and complaints.
Issues with credit cards
Credit cards can expire, be cancelled, or decline. This can result in failed transactions when trying to charge cancellation fees.
The impact of deposits on salon performance
Data from Kitomba reveals the significant benefits of taking deposits:
- Increased client spend: Kitomba customers who take online deposits see a 2% average increase in client spend and a 9% increase in retail spend.
- Reduced no-shows: Salons that require 100% deposits experience a 29% reduction in cancelled or no-show appointments compared to those that don’t take any deposits.
- Financial security: One in every 10 appointments results in a cancellation or no-show for the average salon, which can mean missing out on tens of thousands of dollars per year. Taking deposits helps mitigate this loss.
What salons say about taking deposits
For Oscar Oscar Salons, taking deposits has helped to almost eliminate no-shows and late cancellations from their businesses, explained Laura Hunter, salon partner at Oscar Oscar Salons, Indooroopilly.
“To a salon owner who is hesitant about taking deposits, I would say that introducing a little bit of friction in that process will completely eliminate time wasters from your business, and really solidify the people who are serious about your time in the salon,” Laura said.
“I even find that people forget that they’ve paid a booking deposit online, which is great for them because they get to the end of their appointment and surprise, it’s a little cheaper than they thought it would be.”
In summary
While both taking upfront deposits and charging cancellation fees after a no-show or last-minute cancellation are effective strategies for salons to reduce no-shows and cancellations, the benefits of taking deposits upfront far surpass charging fees after the fact.
Taking deposits in advance is a better experience for clients while charging fees after the fact is a negative experience. By securing appointments with deposits, you not only protect your business from financial loss but also enhance the client experience.
It’s time to embrace this change and set a new standard in the industry.
In our new eBook, No More No-Shows, we’ve compiled a comprehensive guide packed with actionable steps that you can implement right away. These strategies are designed to help you significantly reduce the risk of no-shows and cancellations, giving you peace of mind and a more predictable revenue stream.
Don’t let no-shows and cancellations jeopardize your business’s future. Download our eBook today and take the first step towards securing your salon, spa, or clinic’s financial health.
