Corrective Strategies for Spas in Crisis – Part 8: Treatment Menu Engineering

 

 

A treatment menu, the symbol for any given spa, could be defined as the result of a process of “engineering”. Developing a treatment menu is a complex and difficult task. At first sight, it may seem easy and natural to pick a set of treatments and massages and bring them together into a menu. However, it is a process that requires careful thought and analysis.

 

To begin with, it is important to know the profitability and popularity of the competitive elements of the treatment menu. Treatment menu engineering implies a responsibility and requires managers to possess a sound knowledge of the spa’s costs and sales. It is therefore essential to know the direct cost of all items offered in order to properly set an adequate sales price. Finally, and in order to be able to make comparisons, it is necessary to have sales data of each of the treatments on the menu and to compare treatments in the same competitive category.

 

Factors contributing to success

Successful engineering of a treatment menu is based on three factors: contribution margin, customer demand and a good combination of the treatments and services that are offered. The contribution margin is the mathematical difference between the selling price of a treatment and its direct cost. The higher the contribution margin of a treatment or service, the more important it is to sell that treatment or service. The contribution margin gives us a clear idea about the role that each treatment plays on our bottom line.

In order to develop a competitive treatment menu, it is convenient to create a list of all the treatments according to type of treatment. It is also advisable to know the exact number of the treatments that are sold during a specific period of time, which can vary according to different criteria set by the spa and usually ranges from one to three months. Furthermore, it is essential to know the total direct cost of each individual treatment. Finally, in order to analyse sales, it is important to have a price list of each of the items included in the treatment menu.

 

The 4 sections of a treatment menu

Treatment menu engineering requires the menu to be split into four different sections in order to ascertain which treatments are selling and what effect they have on the bottom line. These four sections are known as stars, plow horses, puzzles and dogs. Treatments under the ‘stars’ section are those that have low cost of sales but are strong sellers. Under ‘plow horses’ are those treatments that have a high cost of sale but also a high sales turnover. Puzzles include our low cost and poor selling treatments, and finally, under the ‘dogs’ section we have our high cost of sale treatments that sell poorly.

Knowing the target market for each one of our treatments as well as the kinds of treatments to include in the menu is the key of a well-developed treatment menu. When judging the importance of a well-elaborated menu, it is also relevant to keep in mind its close relationship with a coherent pricing strategy and a successful yield management system.

As can be seen, developing a successful treatment menu is not matter of chance, nor is it a simple list of treatments and services. A well-written menu contributes significantly to the bottom line of a spa. It is a process that requires constant analysis and understanding of our treatments and, above all, what our customer is demanding.

 

Articles of Interest: Spa Revenue Management Techniques: Dynamic Pricing, Dynamic Availability and Menu Engineering

By Sonal

Sonal Uberoi creates and delivers smarter spas around the world. Spas and hotel groups hire Sonal to help them design, set up and manage their wellness businesses. Her finance background and worldwide operations experience in the spa, wellness and hospitality sectors make Sonal the go-to expert for business optimisation solutions. Connect with Sonal on LinkedIn www.linkedin.com/in/sonaluberoi.

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