Price Elasticity – We demand to be supplied with a higher price!
How far (high) can you stretch the price before demand breaks?
That is the big question for haircutters.
Fortunately, you have metrics to measure this and tools to use to get your pricing right and maximize your earning potential.
Supply and demand is a basic economic principle you learn early on in your life. When the new hot toy is hard to find in stores and on line people charge a premium for it. Later when the supply is overwhelming, you see the price bottom out.
Here are my tips and steps to understand, use and manage supply and demand and to leverage the elasticity of pricing in hair cutting.
Determine your supply - What do you offer and how much of it? You do haircuts. 2 per hour, 8 hours per day and 5 days per week, 50 weeks per year. (just an example). This is your supply.
Create demand - Get a license and education. Build your skills. Hang up a sign. Get a job. Open a business. Do good work. Get the word out. Americans buy haircuts. You have haircuts to buy. Congrats. You are in the game.
Build demand - Ask for referrals. Get a line going. Offer haircuts that people want. Create trends that people wish to embrace. The more demand you can build the better.
Track your demand - Count heads. Know how busy you are. Know how many spaces are filled. Know how many of the haircuts that you CAN do are being done and paid for. Track the trend of this. Know when you are growing your business and by how much.
Hit the tipping point - For haircuts this point is 80% occupied. 8 of 10 of your available haircuts are being purchased. 8 of 10 of your appointment spots are full. When you can run 80% full for 6 weeks in a row it is time to get elastic. It is time to stretch the price. The price goes up. You make more money per haircut. If you are lucky the demand dips a bit. Some people opt not to buy. This is ideal. You now get back to getting busy building demand at the new price.
Lather, rinse, repeat - This is the way the game is played. Start all over again. Assess your supply. Build demand, track results, hit the tipping point, level up again.
I am here to help you play and win the haircut pricing game.