What can the protection market learn from hairdressers?

Roger Edwards, proposition director at Bright Grey, asks why protection providers don’t offer more ‘add-ons’ to differentiate their service. I mean, if hair salons do it…

I haven’t thought about hairdressers for many years. When I was younger and my hair was a thick, late-1980s quiff, I went through the ‘barber on the corner’ stage. Then I graduated to a proper hair salon (mainly because I could get my hair cut by a cheerful girl rather than a grumpy old barber). Now I have a pair of clippers and indulge in a swift ‘number two’ haircut once a fortnight stood over the kitchen sink.

It’s easy to dismiss hairdressers. And yet walk down any street in any town or city and there may well be more hair salons than there are fast food takeaways. For some, having their hair styled, coloured, straightened or curled is an experience to be savoured and even ventures into ‘treat’ territory. But with so many salons on offer, how on earth do they differentiate themselves enough to be profitable – or is it just that there are more than enough customers to go round?

I became a little more interested in hairdressers when my wife came home with a booklet from her favourite salon. I idly flipped through it and found myself extremely impressed by what the owner had done to the customer experience. He was constantly looking to sell add-on business. The most experienced employees were called ‘senior art directors’ and their services came at a premium. Everyone buying the basic service – say, a cut and blow dry – is offered a £15 upgrade to a ‘Bliss’ treatment. This involves a head and neck massage with exotic oils and a hair treatment with scented conditioner. There’s even a £20 ‘Exotic’ upgrade with more indulgent lotions.

This salon has turned a relatively mundane ‘treat’ into one that has ventured into the pampering domain of a health spa. Even in a recession, people are, apparently, easily convinced to spend the extra on the upgrade. Get each client to spend that extra every few weeks and this modest marketing effort turns into a healthy extra profit margin.

Of course, there is nothing new in adding value in this way. In the protection market, we have tried similar approaches. Granted term assurance does not have the tangible immediacy of a good pampering. It has to be sold rather than bought, but it does offer good value for money.

So why shouldn’t we offer extra benefits to attract customers? Some companies offer a counselling and emotional support service through providers like Red Arc. Others offer access to a worldwide network of ‘Best Doctors’. But 10 years ago such add-ons would have been dismissed as gimmicks. Now, with more claimants benefiting from, and in some cases becoming staunch advocates of, such add-ons, they have become accepted. Many advisers use such services to justify one provider’s term assurance over another.

But whilst hairdressers can charge an extra £20 for their add-ons – and easyJet £16 for ‘speedy boarding’ – we cannot charge an explicit extra for our added value services. Imagine adding on even £5 a month to the cost of term assurance. You would drop to the bottom of the any comparison service and no one would give you any business. Protection added value services have to be ‘free’. Or at least the cost, if any, has to be included in the rate and the product price as a whole has to be ‘there or thereabouts’ whether they include extras or not.

It can be quite a task to convince people of the need for protection, especially in a recession. And no amount of marketing will ever turn it into an aspirational product. And the same goes for the desirability of any add-ons.

But I would like to think that one day the added value services that some companies are offering on their protection products will become important, if not desirable enough, to be able to command their own price premium.

Roger Edwards is proposition director at Bright Grey