The Shift of Purchasing Power to the Consumer

At the New York Spa Conference this past May, Dan Chandre, VP of Operations for GramercyOne, discussed the recent shift in purchasing power, the boom of social media and e-commerce, and the tactics companies can use to combat these trends.

Since technological advances created the age of free information, there has been a consumer revolution—purchasing habits have become independent, and consumers have become price-proof. In 2007, the market was centered around products; prices were based on competition and inventory control, and they rarely changed. At the time, interactions between consumers and suppliers were simple: consumers made purchasing decisions after being driven to the supplier’s website via search engine optimization (SEO). But 2008 showed a decline in this behavior—consumers began to search for user-generated content in favor of visiting the suppliers’ direct websites thanks to the sudden increase in social media, the impact of e-commerce, and the trust placed upon such user-generated sites.

The explosion of social media is evident across the globe. Facebook has more than 800 million users, and numbers continue to grow every day (see chart below). This chart, taken from Coyle Hospitality Group’s 2011 Global Spa Report, also shows that general website usage is increasing. Most notable is the 30% jump in the use of Groupon as well as the popularity of Living Social on the online scene.

The main point here is this: consumers can search product prices in real time, giving them the power to buy your product somewhere else for less. So, what can you do as a business owner to compete with this outburst of social commerce?

The first solution is obvious: utilize these resources. As noted in the chart, Twitter usage is growing. Twitter’s primary function is not limited to its home site—users can access twitter and create tweets through many other outlets. This gives businesses a unique opportunity to speak to consumers in real time and extend their reach. Take this scenario for example: after a hard day at work, a spa consumer tweets “I need a massage!” In response, a spa in her area—well-informed and proactive about social media—follows-up by tweeting a deal to any guest that comes in for a service within the next hour. The strategy is simple and effective. Companies who build value into their products attract price-sensitive consumers.

Second, companies must make a decision on whether to provide deals or not by considering existing clients and structuring promotions in a beneficial way. The web offers more than 100 deal sites—location and industry specific—that are impervious to the various types of consumers, like Groupon and Living Social. According to Coyle’s Spa Report, 71% of research respondents cited “finding deals” as their primary reason for using websites containing spa information. With such a high percentage, a risk-analysis on deal-offerings is necessary. If offered, businesses must increase the focus on client loyalty in a way that does not punish consumers for using deal sites. Most importantly, it is essential not to offend current clients by offering deals only to prospective ones. Doing so punishes and unnecessarily upsets loyal guests.

What does this all mean for spa owners? First, consumers have the power to set price points based on real time comparisons, which could loosen their loyalty. To retain them, why not offer a promotion that deters them from betrayal and keeps their focus on your brand? Clients recognize excellent service and will remain loyal when treated with care. Second, consumers feel less pressured to purchase products early. To compliment this behavior, offer last-minute deals on dynamic websites, similar to the Twitter scenario discussed earlier. Finally, guest loyalty is an exclusivity item not to be measured in a one-to-one dollar value. Stimulate guest loyalty by showing current clients that their purchases allow them to earn something bigger, such as a deal or a promotion. With yield management in mind, structure those deals in a way that encourages additional spending, and always have an executable strategy to bring guests back.

How can spa owners react to the overall picture? By understanding the importance of social media. Take advantage of YouTube and update your company’s profile on LinkedIn to connect with new people everyday. Rather than simply communicate with current clients, integrate with all consumers. Manage your online reputation. As seen in the table below—taken from Coyle’s Spa Report—47% of respondents said they were likely or very likely to communicate experiences via an online review, and 40% would post on a social networking site. You must monitor these websites at all times to know what is being said.

To read more about the spa industry from Coyle Hospitality Group or to view Coyle’s full Global Spa Report, please visit www.coylehospitality.com/2011-global-spa-report/

© 2020 Coyle Hospitality Group. Reproduction of any material without written authorization is strictly prohibited.

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