OnDemand WTP Pricing Research

Pricer’s Points: Is ‘free’ the best way to get loyal customers? | Matt Burnett

The movie you watch will be the same regardless of where you watch it. There are some ways to differentiate, such as, with luxury seating, advanced screenings, free parking etc. But when that isn’t enough then resorting to giving a free screening after x number of ticket purchases might not be too bad a thing.

However, when it comes to salons I’m not sure it’s the best way to engender loyalty amongst your customers. Haircuts are complicated products. Everyone likes to have their hair cut in a particular style. Yours truly has been using the same stylist for nearly seven years. They know what I want without me even asking and so far they haven’t screwed things up. This is probably the same with most people when it comes to a haircut. You find somewhere that works and you stick to it. Price most likely isn’t the determining factor. A better way to encourage loyalty could be to offer an introductory discount on a higher grade stylist or a complimentary styling product.

I know for a fact that my friend was excited by his free haircut for the exact reason that he had no clue he was going to get it for free when he walked in. He was never going to switch salons because he was happy with them. Now, however, they’ve set a precedent. He’ll likely be expecting more free cuts in the future. With a simple gesture the salon have made price a determining factor of the purchase when it never should have been. All of a sudden haircuts for my friend are more price elastic than they were before and for the salon that’s not a good thing. A good salon should be engendering such a loyalty that a small price rise now and again isn’t poorly received by its customers. Jim Morrison was disappointed with the bad haircuts, but probably not how much he paid for them.

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Is ‘free’ the best way to get loyal customers?

Matt Burnett

Pricing Analyst at B&Q