Pricing strategy to reframe the day spa experience
Our senior marketing strategy class was tasked with a group project consulting various local businesses on marketing challenges. We decided to work with Lakehouse Spa and Resort, a renowned destination spa located on the shores of Lake Austin.
The Research
We surveyed 500 Lakehouse Spa customers on their visiting habits and discovered some important trends. Though the resort had made quite a name for itself as a destination spa, attracting visitors from around the US to weekend luxury retreats, the facilities and services were drastically underutilized during the weekday. Our project attempted to identify the behaviors and prefences governing visitation, and identify a solution to fill the gap and increase overall profitability.
Competitive research further revealed the spa was significantly more expensive than its competitors. Though its visitors were affluent, price was cited as the number one barrier to frequent visits. The majority of customers surveyed only visited the spa once or twice a year, despite their proximity to the resort and excellent feedback on the overall experience.
The world-class facilities and luxury packages commanded a premium price, and this created a perception barrier around the way customers viewed the experience. Massage packages from the downtown Milk+Honey presented an image of regular perks and pick-me-ups, while Lakehouse presented a feeling of weekend getaways or holiday celebrations. In order to increase day spa visits, we needed to tackle those perceptions and find a market that would respond.
Our Solution
To tackle this problem, our team sought inspiration from similar industries and the markets they targeted. The solution we presented was a yearly membership program providing unlimited access to the resort facilities (including pools, sundeck, cafe, reading rooms, and sauna) and a preset number of included services per month (such as massages and facials).
Additionally, we rebranded the package as a weekly getaway and health retreat, focusing on the benefits to stress relief and relaxation. Our marketing was targeted primarily towards professionals, stay-at-home mothers, health-conscious citizens, and couples near the North Austin location.
To increase word-of-mouth, the membership package included rewards for frequent services and referrals.
We designed the pricing and service models around the spa's fixed and variable costs and were able to reach a price point similar to the cost of one of the resort's original weekend packages. The benefit to consumers is this price could be averaged around yearly attendance and the customers could gain additional benefits and rewards for being a member.
The package was priced in such a way that the spa could expect to see a 3-fold increase in profitability per member, much greater utilization of it's facilities, and an increase overall brand perception.
