I have been getting my hair cut at the same place every 4 or 5 weeks for the past 11 years. For simplicity, I will call the business Hair. It is a local salon that serves men, women and kids in our community of around 10,000 people. Most of the current stylists were not there when I started going to Hair, and there have been a number of personnel changes over the years. The owners, the building, the chairs and the tabloid magazines available to read have all stayed the same. One thing that has changed in that time is their pricing. They seem to be getting smarter at it.
I first went to Hair when I moved to the community, and I asked a neighbor for a recommendation. My experience was good – the stylist was friendly, she did a good job in my opinion, the salon was clean, and I thought the price was low. In fact, the price was about half what I had been paying in my previous town. As I went back every four weeks or so, I continued to believe their prices were not optimal. I certainly would have paid more for my haircut, and I think most people would have done the same.
Hair kept their price for a men’s haircut the same for the first several years of my experience, but about 4 years ago I noticed a change. They started to segment their customers and differentiate their prices. Men’s haircut prices started increasing a couple dollars per year, but boy’s haircuts increased less or stayed flat. In percentage terms, those increases were certainly higher than inflation, but nobody complains when it is a couple bucks. My wife said the prices of women’s cuts increased too, but at a slower rate. That all made sense to me. The most underpriced group, men, saw the largest increases that moved Hair closer to competitor prices; and the most price-sensitive group, kids, saw smaller increases.
Each of the last 2 years, Hair has increased prices on men’s haircuts by $1 per year. A low percentage, and frankly not much money. Nobody complains and when the increase is small, there is no incentive to look for an alternative. The price of a men’s cut at Hair is probably still lower than competitors, but not hugely. But the owners of Hair are making logical, gradual increases in prices that without creating an incentive for their customers to comparison shop. That is smart, although they could probably do even more. Hair salon loyalty is generally higher than for many other retailers and service providers. It is a personal thing, and once we have a relationship, we tend to be less price sensitive.
I applaud Hair for improving their pricing strategies. I guess I will know if any of them read my blog soon enough. If they are, my price for a haircut will increase in a few months, and I won’t mind.