Here’s great news for one of the biggest growth areas in beauty and wellness: Medical spas in the U.S. have seen increased demand for their services after Covid restrictions.
According to the American Med Spa Association, the average patient spent more than $500 per visit in 2022, up from roughly $450 in 2019. An increase in patient spending is always good news. However, the cost of goods sold went up too for medspas – from 29% of total expenses in 2018 to 35% in 2022.
While market forces like inflation may be outside your control, medspas can implement a number of strategies to become more profitable. Here, we cover how to take advantage of three revenue boosters for medspas – gift cards, memberships, and packages – with insights that medspa experts shared in a panel at Innergize 2023.
Julie Acarregui, Founder & Medical Director, PURE Medical Spa
Kate Dee, MD, Owner, Glow Medispa
Donna Simonds, former President, Laser MD Medspa
This post includes data from Zenoti research, specifically around medspa business performance in the United States. The metrics give you an opportunity to gauge how your medspa compares to others in the industry.
Strategy 1: Gift cards
If you don’t have a year-round gift card strategy, develop one. It’s a smart business move. An ongoing gift card initiative acts as a referral program, helping medspas expand their client base by making it easy for satisfied customers to refer friends and family.
1) Sell gift cards online to boost medspa revenue 24x7.
Digital gift cards can be purchased anywhere and anytime, delivered via email in an instant or at a scheduled time.
Donna Simonds, former president of Laser MD Medspa, says the greatest volume of gift card sales for her business is online. “I love when you check in and suddenly see 10 gift cards bought while you’re closed,” she says.
Zenoti medspas can offer digital gift cards with predefined amounts they choose (like $100, $500, and $1,000) or custom amounts for buyers to select. For optimal flexibility, Zenoti software makes it easy to create gift cards for specific services.
2) Offer gift card promotions just a few times a year – and keep it simple.
Julie Acarregui from PURE Medical Spa reports great success with offering special promotions for gift card purchases. Her strategy is twofold: First, carefully choose the right times of year. She selects Mother’s Day, Black Friday/Cyber Monday, and “The 12 Days of Christmas.” Second, only offer two tiers of promotion: Buy a $200 gift card and get $50 free, or buy a $400 gift card and get $125 free.
PURE clients often buy gift cards for themselves to put the extra money in their wallet and let it sit there. “People know they can rely on it, and we don’t offer the promotions any other times of the year,” says Acarregui.
3) Drive urgency for gift card redemption.
Donna Simonds suggests a way to encourage timely redemption of gift cards: Put an end date on the promotional value of the card.
“If you’re doing a $100 gift card with $50 extra, the promotional value can expire,” she explains. “That extra $50 can absolutely have an expiration date because they didn’t purchase it.” To drive client visits during lean periods on the calendar, Simonds has the promotional value of gift cards expire during those slowest times.
Even beyond promotional value, there’s a good chance your clients will spend more than the gift card value anyway. A 2022 consumer study showed that six out of 10 customers with a $100 gift card will spend $74 more.
Strategy 2: Memberships
As a source of recurring revenue, memberships help medspas stay profitable. Data from the 2023 industry benchmark report from Zenoti shows that medspas offering memberships earn 22% more revenue than those that don’t. In addition, the recurring income boosts a medspa brand’s valuation, making them more attractive to private equity firms looking for an acquisition.
1) Be proactive about selling memberships and make it a team effort.
Rather than delegate membership sales solely to staff with the most client contact, help all team members feel invested in the program and incentivize them. Julie Acarregui says memberships are a team goal at PURE Medical Spa where all staff, including management and the front desk, stay aware of membership sales and earn commissions on memberships sold.
“Memberships are a KPI for our spa directors. The providers are bonused on it, and the front desk is also bonused on selling memberships,” says Acarregui. “Part of the bloodline of our business is making sure everyone that walks through our doors is presented a membership opportunity.”
2) Pay aestheticians high commissions for membership sales.
Donna Simonds suggests rewarding staff with higher commissions than usual with each membership sale. “They’re only paid that one time because we pay commission on the sale, not on service. It’s a one-time commission for the sale of recurring revenue,” says Simonds. “From a business perspective, you’re actually reducing your overall payroll because you’re not paying commission on everything.”
Aestheticians love this commission structure. “They get instant gratification on getting their commissions in real time, right away,” says Simonds.
3) Just like gift cards, keep memberships simple and sell them online.
Donna Simonds strongly advocates selling medspa memberships online, noting that 10% of membership sales happen there. If a client is deemed medically ineligible for the treatments within a purchased membership, Simonds recommends simply issuing a refund – ineligibility pops up for only about 1% of clients.
“I’m never worried about ‘what if they’re not eligible?’ They need to have a consult first,” says Simonds. Take those barriers down. You make it simple. They buy it online, they come into your location, and hopefully they become medspa clients and use all the other full services for life.”
Strategy 3: Packages
As a selling tool, packages help medspas earn more revenue while securing greater guest loyalty. Data from the 2023 industry benchmark report from Zenoti shows that medspas generate 4x more revenue from packages as they do from memberships.
1) Hold an open house focused on package sales.
Glow Medispa sells all services – except injectables – in packages. Dr. Kate Dee holds an open house each September, a hit with clients who show up like clockwork to secure special package-only pricing. “We have some people who’ve done RF microneedling every year for five years,” says Dr. Dee, “and every year at the open house, they’re like, ‘Sign me up.’”
2) Give clients tailored treatment plans, including financing.
Spend consultation time with every medspa client. It’s personal, insightful for both parties, and a very sound retention strategy. Every PURE Medical Spa client completes a cosmetic interest questionnaire followed by a 1-hour consultation with an aesthetician who creates a treatment plan based on the guest’s areas of concern.
As a result, PURE aestheticians often sell packages worth as much as $15,000-$20,000. At that price, they allow clients to put down a 25% payment and finance the rest over 11 months with no interest.
Julie Acarregui says the approach has created a business boom. “It’s grown by over 800% because of this program alone. We set it up in Zenoti. It’s automatic. It’s the easiest thing in the world,” she explains. “That payment is processed on the first of every month, and it could be anywhere from $100 to $900 a month.”
3) Complement packages with retail products.
Add a free product or product sample on the first visit, and adjust the package price to compensate. Offering retail items as part of a package boosts recurring revenue for medspas as “it introduces the client to that product to be continually purchased from your location,” says Donna Simonds. She and other business leaders use Zenoti software to track such purchases, to help staff remind clients on future visits, further building on potential revenue.
Bundling services into packages isn’t new for medspas, but what’s possible with technology is. Package creation is effortless in Zenoti with redemption just as easy for guests. Multi-location brands can create packages centrally and deploy them to all locations – or just some – with just a few clicks.
Referrals play a key role in driving profitability through new guest acquisition. While not considered a revenue-boosting tool in the same way as gift cards, memberships, or packages, referrals can have a sizable impact on a medspa’s bottom line.
Zenoti data shows that high-performing medspas generate twice as many referrals as average medspas.
If word of mouth is helping you grow your medspa client base, Zenoti offers ways to simplify and automate referral programs.
Dr. Kate Dee from Glow Medispa maintains that providing an amazing experience for patients is crucial to getting referrals. While about one half of her new patients come from online search and reviews, the rest are referred by friends.
“Every other referral source is piddly compared to those two things. Zenoti has the refer-a-friend feature, which is awesome,” says Dr. Dee of the ease of digital referrals, a vast improvement over paper-based programs.
Julie Acarregui agrees that happy clients are a medspa’s best referral source. “Our referral program gives $50 to both the referrer and the referee,” says Acarregui. “I know we'll get that back tenfold over. And we have found that works really well.”
Feature image: Donna Simonds (former president of Laser MD Medspa) and Julie Acarregui from PURE Medical Spa