The Saving Advice Forums - A classic personal finance community.

Should I raise my prices?

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Should I raise my prices?

    So my hair salons charge $14 for an adult haircut, and $12 for a child or senior. We have kept these prices for 3 years, which is really incredible in my opinion.

    Here is our competitors:

    A - $17.95
    B - $16.95
    C - $16.95
    D - $16.50

    Now, I believe that we offer a way superior product to any of these guys. We are more professional and we are more convenient. We are cleaner and more upscale.

    Meanwhile, I am really starting to feel the pinch on overhead, because EVERYTHING has gone up in 3 years. My labor costs, which are almost half of my overhead, have gone up 11 percent the last 2 years. Rents, utilities, and supplies have gone up. But the franchisor always advises against raising prices. Now from their vantage point, I can see it why:. They are getting a single digit percent of your sales, so they would just as soon you never rock the boat. But I don't want to wait so long that I am seriously behind and then i have to go up even more!

    If I increase my prices, it will go from $14/12 to $15/13. What do you guys think? Will this have any material affect on my business?
    7
    You should keep your prices in check - it will hurt your business
    0%
    0
    You are OK to raise prices by one dollar
    100.00%
    7

  • #2
    I don't think that $1 is all that detrimental. You are still lower than the competition.
    What is your volume?
    What does $1 do for monthly revenue?
    Brian

    Comment


    • #3
      I would think $1/haircut would not deter customers, especially if they are satisfied with your service and you're still cheaper than the competition. As a third option, how much does it help your situation while minimizing impact to customers if you increase adult prices only? What if you raised them $1-1.5 but kept children and seniors the same? Do you have a breakdown of what percentage of sales is adult vs discounted? Thought being that those with an income thats likely increasing with inflation will be picking up the cost increase for those with 0 or fixed income

      Comment


      • #4
        Originally posted by bjl584 View Post
        I don't think that $1 is all that detrimental. You are still lower than the competition.
        What is your volume?
        What does $1 do for monthly revenue?
        It does A LOT. Would kind of get me back to where I was three years ago when i went from $13 to $14.

        I mean this as a serious question. Other than possibly the price of a gallon of gas, is there anything that costs the same as what it did 3 years ago? I really want to make the right decision here.

        Comment


        • #5
          Originally posted by riverwed070707 View Post
          I would think $1/haircut would not deter customers, especially if they are satisfied with your service and you're still cheaper than the competition. As a third option, how much does it help your situation while minimizing impact to customers if you increase adult prices only? What if you raised them $1-1.5 but kept children and seniors the same? Do you have a breakdown of what percentage of sales is adult vs discounted? Thought being that those with an income thats likely increasing with inflation will be picking up the cost increase for those with 0 or fixed income
          One thing we are required to do is flat dollar pricing. It is part of the franchise's core values - upfront pricing with no games.

          In 2011, we started out at $12/10. Then we went to $13/10 in 2014, and $14/12 in 2016.

          Comment


          • #6
            Originally posted by TexasHusker View Post

            It does A LOT. Would kind of get me back to where I was three years ago when i went from $13 to $14.

            I mean this as a serious question. Other than possibly the price of a gallon of gas, is there anything that costs the same as what it did 3 years ago? I really want to make the right decision here.
            Not much that I can think of is the same price as it was 3 years ago.
            I think it's time to raise prices to curb rising operating costs.
            Brian

            Comment


            • #7
              Originally posted by TexasHusker View Post

              One thing we are required to do is flat dollar pricing. It is part of the franchise's core values - upfront pricing with no games.

              In 2011, we started out at $12/10. Then we went to $13/10 in 2014, and $14/12 in 2016.
              Unless 13/10 was a typo could you do $15/12 this time?

              Comment


              • #8
                hard to say, cuold be that people are going to you because you're known as the cheapest option. if you start raising your prices, people may not be as inclined to go to your shop and go somewhere more convenient even though it might cost a little more? Have you seen the number of customers go up in that period of time as well?

                keeping your reputation as the walmart of hair cuts might be worth it. just providing a contrary opinion.
                Last edited by ~bs; 02-12-2019, 11:59 AM.

                Comment


                • #9
                  Texas, I spent like a half an hour looking at economics literature on this. There was next to nothing easily accessible on the price elasticity of demand for haircuts, which tells you how much people still want haircuts if you raise the price. I think this is basically what you're asking.

                  What did come up two or three times was the relationship between service quality and perceived appropriateness of price. I saw one article on this from Korea, which I figured wasn't applicable. Instead, I found a piece from Forbes that addresses this:

                  While soft goods retailers are shuttering stores in record numbers, a cultural resurgence of men's grooming, estimated to reach $26B by 2020, has barbers, brokers and landlords lining up to get their cut.


                  K K BarbershopDaniel Wehner, Flick


                  “You don’t just look better — you feel better too,” said Carlos Aguilar, a 28-year-old restaurant manager in Houston. He has a standing appointment with his barber every two weeks, spending about $60 and 45 minutes each visit. “It’s something special. I know when I go on a Thursday afternoon it’s going to be a good weekend. You’re ready.”


                  Here is the link to the full story:

                  A cultural resurgence of men's grooming, estimated to reach $26B by 2020, has barbers, brokers and landlords lining up to get their cut


                  Another thought might be to estimate the change in demand yourself - you'd need before and after pricing as well as sales volume. There are on-line calculators that let you do it.

                  Hope this helps.
                  james.c.hendrickson@gmail.com
                  202.468.6043

                  Comment


                  • #10
                    Raise your prices. One of the biggest mistakes that small business owners make is undercharging for their goods and services. Even after going up $1, you will still be the cheapest in town by at least $1.50. You aren't a charity. You're a business. You have expenses to meet and need to make a profit reasonable enough to make the effort worthwhile. You're absolutely right that the cost of nearly everything has gone up so you are totally justified in raising your prices.
                    Steve

                    * Despite the high cost of living, it remains very popular.
                    * Why should I pay for my daughter's education when she already knows everything?
                    * There are no shortcuts to anywhere worth going.

                    Comment


                    • #11
                      This is all great feedback everyone thank you. I absolutely hate raising prices because I do not want to be greedy or breach the trust of my customers, but I think it is time. I have calculated everything and it looks like expenses have gone up around 7 percent in 37 months, so that would be approximately the percentage of going up one dollar.

                      Thanks James for the research as well. Ironically, the rise of the "barber shop" of late has actually cut into us some. There are several fancy varieties of the barber shop that have opened up around us and they do "sell" masculinity and the whole barbershop experience. But they are usually at least several dollars more than we are. We sell convenience with online check-in, professionalism by our dress code and appearance, and consistency with our cutting system and clip notes - you should be able to walk into any of our locations worldwide and get the exact haircut that you want, and with online check-in you shouldn't have to wait long for it. We are also open 7 days a week, from 9am to 9pm weekdays, and until 6pm on weekends, so that our customers can come in any time. But there is no question that the barber shop craze has hurt us a bit. I think it is a fad really.

                      I think what I will do is give our customers one month notice by posting something, that way they are not offended when they walk in and it's suddenly one dollar more.
                      Last edited by TexasHusker; 02-12-2019, 03:30 PM.

                      Comment


                      • #12
                        I think $1 is more than fair after three years. And giving notice is very nice of you.
                        My other blog is Your Organized Friend.

                        Comment


                        • #13
                          I have a degree in economics/econometrics and started my career as a pricing analyst. I literally analyzed these kind of decisions on a corporate level for a living.

                          You are more than okay to raise your prices. Your hesitancy seems to be coming from not wanting to be greedy (and that’s a great thing!) but this is often where small business owners will turn this great thing into a fault. Your price increase is driven by higher costs not greed. This is a very common practice and your customers will understand.

                          You’re offering superior service at lower pricing than your competitors. Even if your value proposition was just low pricing, your raised prices are still cheaper than your competitor’s.

                          I like the idea of giving customers a notice period and was going to suggest something similar. I’d let customers know when they come in that prices will increase to $x starting on x date.

                          Good luck!

                          Comment


                          • #14
                            It occurred to me that you only mentioned your basic haircut prices. What about extra stuff and upsell services like coloring, perms, waves, extensions, and anything else you offer? Have you also looked to see where you stand relative to the competition with those prices? That might be another place to adjust to help the bottom line.
                            Steve

                            * Despite the high cost of living, it remains very popular.
                            * Why should I pay for my daughter's education when she already knows everything?
                            * There are no shortcuts to anywhere worth going.

                            Comment


                            • #15
                              Raising your prices 1 dollar boosts them about 7-8%. Stretched over 3 years that’s a bit more than just room for recent inflation rates(I’m not a pricing expert but in my work our starting measurement for price hikes is inflation rates). Our costs go up annually and thus our prices reflect that. Our market isn’t budget clientele so different things factor in, but you cannot continue to ignore inflation unless there are other factors at play, without seeing consequences.

                              Comment

                              Working...
                              X