When giving something for free might not be the best way to engender loyalty.
The late-American singer-songwriter Jim Morrison once said, “Some of the worst mistakes in my life were haircuts.” A few evenings ago I met a friend for a few Xmas drinks. Amongst everything else we spoke about my friend was excited to tell me that when he got his haircut a few days earlier he didn’t have to a pay a thing. Now, his wasn’t cut by a friend in return for a favour but at the same salon he goes to every few weeks.
It transpires that this salon, like many other business, like to give something away for free in return for something from the customer: loyalty. The salon’s promotion means that you get every fourth haircut for free. This got me thinking: is this really the best way to encourage loyalty with your customers?
Salons are not the only type of business to use such a loyalty scheme: coffee shops, DVD rental stores (when they existed), cinemas, restaurants, to name a few, have all deployed this tactic at some point. In some instances it can make sense, particularly when what you sell is close to being a commodity item or competition is especially fierce. Cinemas are a good example. 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.