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March 2006

PCP Price Communication. March 2006. PCP Price Background. A $5 price increase per program is necessary. Effective June 1 st. Background: Cost of hair has increased by approximately 16% in the past 24 months. Higher factory costs

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March 2006

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  1. PCP Price Communication March 2006

  2. PCP Price Background A $5 price increase per program is necessary. Effective June 1st Background: Cost of hair has increased by approximately 16% in the past 24 months. • Higher factory costs • Significantly higher long-hair and larger system surcharges Cost of running a Hair Club has increased by more then 4-7%. Hair Club continues to develop industry leading hair systems and products. • We have the best centers, services and customer programs • We employee the most talented staff in the industry Considerations: Annual prices increases in the face or rising prices are very common; • Inflation average 2% - 3% per annum • Demand for long hair has created additional cost pressures

  3. When? Center staff (Manager, NB1 Consultant, NB2 Consultant, Administrative Assistants and Stylists) begin informing clients on Wednesday March 1st. Fill out new EFT and contract effective June 1, 2006 Price change effective June 1st. How will our clients be informed? We will be providing our members with a standard letter (attached) We will speak to every client about the change We will have consistent communication by all staff members PCP Price Timing

  4. PCP Price Client Letter Letter to our Clients- Hand delivered by Membership Advisor

  5. How to Communicate to our Clients Step 1- We must develop a unique strategy for every client: Stress Benefits of Hair Club 30 years of providing proven and industry leading solutions Best hair quality Best service Always improving products & services Focus on specific client needs Step 2- We will continue to invest in the future to ensure our clients look and feel their best. Step 3: Work as a team:Manager, Consultants, Stylists, Admins PCP Price Client Communication TIP Most people work in a business and understand basic business principles. (When costs go up, revenues received must be increased.) Each team member must convey the same message to ensure our credibility is not questioned.

  6. PCP Price Comments • You will hear a variety of comments and objections which will fall into 3 basic categories: 1. The Unhappy with Service Client 2. The Client who Cannot afford • The Complainer • Plan with your center team for each type of client • Be proactive and strategize about which category the client will likely fall into before they arrive

  7. Concern: 1. “Don’t we pay enough? I can barely afford the program I am on.” 2. “My hair quality is decreasing.” 3. “We just had a price increase two years ago. You are constantly taking things away, when are you going to give? You are always promising better customer service and better hair quality, and I don’t see it.” Response: 1. “Look at the price of gas, real estate, cars, or electricity. Everything has gone up with inflation.” 2. “We strive to be consistent with service and your look. Let’s take another look at your hair order. Perhaps it is the density or type of technology….” 3. “We wish we did not need to do this. In fact, we tried to not pass this on to our members, and hence some of the changes you have seen in the past….. Our costs, though, have increased substantially. I can assure you that we will strive to exceed your expectations through increased solutions, better technology, better products….” PCP Price Client Communication

  8. Concern 4. “What is the program below? I would like to downgrade…” 5. “I refuse to pay more. Who do I need to talk to at corporate?” 6. “I signed a contract for this price.” 7. I have been a member since you opened. ” Response 4. “Bob, I do not think the next program will meet your needs because of services/hair. Let’s do this…the increase does not happen until June. I will make sure you see that you are utilizing your benefits.” 5. “I understand your frustration, but in order to continue to provide you industry leading products and services we must cover a portion of our rising costs…. (Involve Manager) “I understand, Bob. That is why the company is giving you the 3 months notice. I know Hair Club does not like increasing prices; however we must cover a portion of our cost increases.” 7. “As you know---being a client for over 20 years---we have had very few price increases, yet have consistently improved our hair and service. I just want to personally thank you for being a tenured member.” PCP Price Responses

  9. QUESTIONS: What happens for a Gradual? What happens to new NB1 conversions? Can we just start charging the new fee? What happens to clients who have P.I.F. for the year? Scenario 1: Anyone who pre-paid prior to Mar.1, 2006, stays the same. Scenario 2: Anyone who pre-paid after Mar. 1, 2006 Can we give our clients a guarantee that there will not be another price increase? Will the data entry procedure change? What happens to client renewals? What do I need to get signed? ANSWERS: When client is up to renew/join a program, new fee is charged. Yes- You can start charging the new fee immediately. PIF: Scenario 1: Notify of price increase. Price increase effective on renewal date. Scenario 2: Notify client of price increase and calculate the surcharge for all month being prepaid after June 1, 2006. No, Hair Club will do all it can to mitigate future price increase, however, it does not have full control over its cost of providing hair and services. No Contract to be at old price until May 31, 2006. New price takes effect on June 1, 2006. New agreement completed with new price. A new EFT including the surcharge must be signed effective June 1, 2006. PCP Price FAQ

  10. PCP Price Roll-Out Thursday, February 23rd: National Conference Call • Information arrives via e-mail to centers. Friday, February 24th: Manager holds Center Staff meeting: • 1 hour prior to center opening • Manager should serve breakfast • Staff roll plays scenarios (pgs. 7-9) • Manager & Consultants answer any questions • Manager initiates letter campaign to clients starting March 1st • Begin informing clients: • Letter should be hand delivered to every client • Consultants and Managers involved in informing clients. • Daily Morning Meetings with Staff to discuss potential issues and regroup team. • Manager conveys feedback to RDO or Franchise Regional.

  11. APPENDIX

  12. PCP Price PCP Contract Changes • Current PCP contract provides that we have the right to increase monthly program fees only after providing clients with 90 days notice. • This process is lengthy, burdensome and does not reflect our desired approach to make small incremental changes if required, rather than waiting several years and imposing a large increase (e.g. 2004 $20 increase). • To have more flexibility with any required future price increases (e.g. to off-set for inflation, supply pressures etc.), PCP contract will be amended in June to provide that we can implement a yearly price increase, up to a maximum of 2.25%, without any notice period to the client. • This type of “inflationary” adjustment provision is not uncommon in long-term service contracts and is a concept that is readily understood by consumers. The key is that it is limited both in occurrence (once per year) and magnitude (up to 2.25%). • The language for the contract is as follows: • I further understand and agree that the Company has the right, once per year, to increase my monthly program fee by up to 2.25% without further notice to me. The Company shall not be permitted to increase my monthly program fee greater than 2.25% per year unless they provide no less than 6 months notice.

  13. PCP Contract- Renewals/Upgrades (March 1- May 31) Explain new pricing to client Use new price agreement Amend agreement: Current monthly fee paid until May 31, 2006 New monthly fee starts June 1, 2006 PCP Contract- NB1 Conversions: Client will sign up on new price agreements. New monthly fee applies. PCP Price PCP Contract How To

  14. Sample EFT PCP Price PCP Contract How To

  15. PCP Price Helios Clean-up • In order to facilitate the PCP price increase on June 1, 2005, all centers will participate in a clean-up process during May 2005 • This process will include: • Canceling clients who are inactive or have invalid memberships • Updating client EFT profiles for clients with invalid fees, expired credit card information, etc. • Automatically updating all client EFT fees by the $5 increase If you have additional questions, please contact your Regional Director, Senior Sales Consultant, Steve Cook or Steve Miller

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