1. Observation
Exercise Details
Assignment no. 2
By Rolando Alagde

2. 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.

3. 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.

4. 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.

5. 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.

6. The barbershop concept with heavy fixed barber chairs which attracts
predominantly male clients.

7. 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.

8. 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.

9. Given the two experiences
that I got, now tell me which
one of those mentioned would
you prefer?

10. 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.

11. 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.