Observation Exercise Details

Assignment no. 2By Rolando Alagde

This observation was made to

prove that there are lots of

details that are left out

which when noticed would

otherwise prove to be a key

opportunity that can lead to

a competitive advantage. But

think what will happen if a

new entry in the product

category could offer greater

value at a price parity that

is acceptable to the

consumer. This puts both the

typical price competitor and

or the segment specialist at

risk of losing their market.

By way of demonstrating

this concept, let us have

a concrete example. Just

last week I needed a

haircut, so I went to my

favorite salon and noticed

the long queue of people

waiting for service so I

decided to go to a nearby

barbershop. In my place

of abode, generally it is

cheaper to get a haircut

from salons than a

barbershop.

By way of comparison in this case, price of

haircut is 25 percent higher in the

barbershop, but I guess the waiting time that I

would spend at the salon is costlier than the

additional price I have to pay for the haircut so

I decided to have my hair done in the barbershop.

Since it is not only hot but also humid, I decided

to have a hot oil treatment for my scalp and the

cost of doing that in the barbershop is 70%

higher.

However, since I am already having

my hair trimmed there, I decided to

have my scalp treatment done at the

same time. To my pleasant

surprise, the barber did not only

gave me a hot oil in a very

comfortable position, that is in a

reclined barber’s chair, he gave me

a very comforting scalp massage,

covered my eyes with a towel and;

an additional upper and lower body

massage while my scalp was being

steamed. In the end he washed my

hair, gave me a hot towel for my

face after a good shave and all of

these are part of the additional

70% cost that I have to pay for the

service. The haircut was a

pleasant experience that I was

obliged to give the barber an

additional 20% tip for the services

he had rendered.

The barbershop concept with heavy fixed barber chairs which attracts

predominantly male clients.

Compare that with the previous

haircut which I always experience

at the salon, the hairdresser sits

me in a light salon stool after

waiting for my turn in the long

line of waiting costumers, cuts my

hair and applies the hotoil on my

scalp with a semblance of

massaging function. Since he is

in a hurry for his next

customer, he brings me to another

stool, steams my scalp and gives

me several old magazines to read.

He now takes on a new customer

while waiting for my steamer timer

to sound. He comes back to

me, again massages my scalp for a

minute or so and brings me to the

washing area where he washes my

scalp and have it towel dried. He

brings me to the stool again and

use a hair dryer to finish the

process.

A typical high-end salon layout with light movable chairs where clients are moved around

depending on the type of services they will be given.

Given the two experiences

that I got, now tell me which

one of those mentioned would

you prefer?

This is the concept of value dynamics, which is the

technique of using consumer experiences as a leverage

point to drive value higher from the customer

perspective even if he has to pay a relatively higher

price. Consider the competitive landscape; most of us

seniors were used to the idea of getting our haircut

from barbers in the sixties. With the evolution of the

salon, what was previously a feminine domain became the

choice unisex haircutters of the eighties. With

increasing customer volumes in the 90’s salons were

able to offer lower prices than the traditional

barbershop but with the ever increasing volume of

business they adopted processes used by fast food

outlets to enable them to cope up with more customers.

Since these saloons have to contend with a bigger

market most if not all use the standard platform for

fast services provided to their consumers. The only

differentiation are the prices charged, the more known

brands in the category presumably the better stylist

can demand prices higher than the less known names.

With my most recent haircut however, I am coming back to

this barbershop next time for the enhanced customer

experience I received including a short but restful nap

during the whole process of getting my hair done.

Analyzing what happened seems to indicate, that in the

effort of most saloons to compete against each other,

the pursuit of cost or differentiation had created

efficient processes for the business but had left the

needs of the paying customer out of the whole business

model. In an environment where everybody is busy, a

short pampering time afforded for personal enhancement

such as a haircut when used as a central focus of the

basic business model becomes a very powerful argument

for customer loyalty. This is the essence of

competition which I would like to impart through this

report. My end view is to help create the next business

model that would capture the imagination of consumers,

customers and market segments alike. This is creative

thinking for a budding businessman or intrapreneurial

modeling for a mature business that would like to re-

invent itself to gain customer loyalty.