The Eszter Hangos cosmetic studio: Finding the right approach to promotion

Timea Czirner,
European Association of Craft, Small and Medium-Sized Enterprises UEAPME

In 2008, Eszter Hangos, aged 25, graduated from the vocational school where she had studied cosmetics. This
education was very useful because it not only gave her the relevant theoretical knowledge, but also two years
practical experience of providing cosmetic treatment, first for members of her family and later on for real
customers. Her dream was to be a cosmetician and to have a nice workplace. However, at the time of the
economic downturn it was particularly hard to find a job in this field.
She tried to use all of her connections to get a job but without success. After four months of active job
searching, she took an important decision: to set up her own business. She had all the qualifications and
experience she needed. This gave her the confidence to start and the courage to get a loan from the bank with
which to start her business.
Although she was extremely good in her field, she did not have any management or basic business studies
behind her, only the support of her family and friends.
She visited several businesses and learned about the cost of renting a small cosmetician’s room in a beauty
salon. She decided to rent a tiny place in the city centre. It was very cosy and the price was reasonable compared
to the places she had visited before. She had to pay her part of the overhead costs and a fixed amount for renting
the cosmetic tools.
In the beauty salon there were two hairdressers and one manicurist. This was an advantage for her because it
attracted customers. Some of them went to get a haircut and then decided to have their make- up
done afterwards.
In the market there were several small beauty parlours offering differing quality of products and degrees of
professionalism. In a small town like Pécs, word-of-mouth is the most common form of advertising. Good
beauticians can quickly become very popular if they do a good job, can handle customers well and offer services
at a reasonable price.
Most customers are price-sensitive. When Eszter was considering the price-range she should offer, she studied
the market and tried to find out the average price for the different services. She decided to offer high quality
products and chose a high price range. She was aware of the efficiency of word-of-mouth advertising, so she did
not print any flyers or leaflets to promote her business.
However, this was not the main problem. The real difficulty was that she set the prices of her services too high
in times of crisis. Fewer and fewer people were looking for high-quality, highly priced cosmetic services andas
she did no marketing for the business, she did not attract as many customers as she had imagined.
Her costs were high as she had to buy all her beauty products, hire the equipment and decorate the place she was
renting. As all the products had a maximum 1-2 years shelf-life, she had to buy them again and again. She also
had to pay the bills for electricity, heating and the rest of the overheads. All in all, it was very harfor her to meet
these costswhile she was receiving almost no income.
“I was not convinced that with lower prices more customers would come to my place. I decided on a marketing
strategy that would attract the high-income customers. Also, the problem was that most of my customers were
my friends at that time and I was not willing to ask them to pay. Sometimes I even let the friends of my friends
go free.”- says Eszter, looking back.
Three of her good friends were studying management, marketing and business studies. They told her that the
first step to attract customers is to set up a marketing plan. So they worked together to find a proper strategy in
order to raise awareness. This included the creation of groups on social sites, advertising through leaflets and
spreading Eszter’s business cards.
No one had ever taught her how to write an appropriate advertising slogan or how to find the best ways to attract
customers. So she had to learn all of these andshee relied on her friends’ knowledge of marketing.
“They suggested that I should decrease the price of my services but I was concerned about the lower profit
margin. If I’d lowered my prices, I would not be able to pay any of my bills.
The marketing of my company went well. Several advertisements were posted on social sites (Facebook and its
Hungarian alternative, called IWIW). The target group were people registered on beauty services websites,
wellness hotels and other local websites,” explains Eszter.
“She did not believe that we could improve her business. And we still believed that if she did not decrease her
prices, even an aggressive marketing strategy would not help to attract customers. She had some new customers
but she did not even manage to earn 20% of her expenditure.” – comments Mariann, a friend of Eszter. “It was
just not right to see her running this high-quality service business with very good skills but not being aware of
how to carry out appropriate marketing,” she adds.
Days went by and more and more new customers showed up as a result of the advertisements posted. However,
turnover did not improve significantly. Eszter’s friends pointed out several times that the reason for this could
be the high prices and the lack of any special discounts or offers. Also, not far from Eszter’s cosmetics studio,
there was a very low-priced service where cosmetician students were doing their internships.
As her friends explained to Eszter, there are basically three approaches young entrepreneurs can take in setting
their prices: 1) using competitors’ prices as a benchmark, 2) determining the desired profit per item by looking
at the cost of making their products or delivering their services, or 3) considering both the competitors’ prices
and cost per item (i.e. a combination of 1 and 2).
Eszter decided to reconsider at least some of her prices. Eszter and her friends chose the third option to set her
prices similar to those of her competitors but taking into account the profit margin she wanted to achieve. The
competitors’ prices were on average 12% cheaper than the prices she had been offering. She decided to lower
her prices slightly while still offering high quality services and products.
“We tried to introduce a monthly discount in order to attract more customers. Each month there were four or
five services that were 10% cheaper than normal. Women were particularly keen on having a face massage or
nice makeup before weddings or other special events. Also waxing was very popular especially in the
summertime. The discounts worked. More and more customers were coming to my place and they told their
friends about the discounts and the quality service,” comments Eszter.
The turnover was increasing. Her turnover grew from about €100 per month to €260 and she managed to pay
almost all of her bills from her income. However, she was still not making a profit.
More and more beauticians were opening businesses in the same street so the competition became very intense.
Consequently, the supply of these services increased, while the demand did not. Most customers wanted to go to
the hairdresser or to have a manicure but only some of them decided to have cosmetic treatment.
After a while Eszter asked her friends again for advice. Since the market was too full and the hairdressers did
not have enough customers, they decided that they would do something together to attract more customers. They
had two ideas. The first idea was to introduce a loyalty card that entitled the customer to some free treatment
(within a certain price range) after the tenth visit.
The other idea was to give a discount card for the other services offered within the studio. For example, if
customers went to the hairdresser, they would get a card that entitled them to a discount on the price of the
cosmetic or manicure service.
This new system needed to be promoted. “We had to decide how we would implement it. Close collaboration
among the staff was necessary. Most of the discounts offered were between 5% and 20%, depending on the
service. All of the cards had the name of the card holder and they were valid for one year,” Eszter recalls.
“We asked a graphic designer to design the promotional card. It included only basic information such as the
address of the beauty centre, the name of the card holder, the discount category, validity date and a nice
background picture. It was printed on paper similar to that used for business cards. Also as part of the
promotion we bought 4kg of small chocolates. It was a small investment for all of us and we really hoped that it
would work. Basically it cost each of us the equivalent of two weeks’ rent. This was the only cost that we had to
share,” adds Brigitta, the hairdresser.
They did not promote the new scheme through leaflets or in newspapers, but relied on the Internet. Everybody
posted an advert on their social sites (including Eszter’s group that she had created at the beginning). In
addition, they created a group for promoting their overall services and discounts.
“We informed every single customer about our new concept and gave them a small chocolate next to the card. I
think the atmosphere is very important for customers. I know many service providers who are not that nice with
their customers and their business is not going so well. People come here to relax and to leave their stress behind
for a short while. The environment and attitude of the staff are crucial,” comments Eszter.
It was not surprising that with time more and more people came in and of course everybody was welcome.
Slowly, the monthly turnover increased to €500 and the cosmetic studio became more and more popular,
particularly among young people. Also the 40-50 age group formed a significant part of the clientele. These
customers mostly requested anti wrinkle face massages and waxing while among younger customers (mostly
students) acne treatment was the most popular.
“It is working and I am very happy we had this idea. Several beauticians started to do similar promotions but
they were not that successful. I wish I had had these ideas earlier and not only in the third year of operation. I
think it is necessary for an entrepreneur to know how to do marketing and how to manage a business. Now I am
attending evening classes related to business, focusing on how to be a good manage,” says Eszter concludingthe
interview.
It is still difficult for a small company to start up a business in a constantly changing environment. In the
case study, two main problems can be highlighted: the lack of appropriate pricing and the absence of a
marketing strategy at the beginning of the business activity. How deep should market analysis be? Can
one carry out such analysis without a business education and rely only on common sense?
What are the best ways to promote a small beautician’s salon? Could Eszter promote her services in a
better way with the same budget?