How Pricing Shapes Behavior on a Grander Scale

Lately, I’ve been contemplating how prices shape the world as we experience it. Prices affect us at an individual and macro level. They influence choices ranging from clothing, decisions to own (or not) car and frequency of routine purchases like a morning cup of coffee en route to work and haircuts.

Over lunch in Williamsburg a few months ago friends were discussing the skyrocketing prices of haircuts since the pandemic when one of them, a high earning architect at a major firm, resolutely said, “I started cutting my own hair.” A wave of silence floated over our table as we looked up in shock at our friend, a former model who grew up in the aesthetically conscious cities of Moscow and Berlin. She continued, “there are excellent YouTube videos online for it.”

I was struck that prices have shot up so much that even high earning professionals are changing their behaviors and not only opting out of what was once considered routine self-care to have a haircut and fully administering the care our themselves but fully normalizing it. Surely, hair professionals never intended to price themselves out of relevance in the market and shape behavior in this way.

Pricing strategy looks beyond choosing prices to a wider range of decisions affecting design, the supply chain and operational structure. In the introduction to “Game Changer,” Jean-Manuel Izaret and Arnab Sinha points to the power of pricing strategy to reshape business, industry and society highlighting Ford’s introduction of the Model T in the early 1900s as an example. At a time when cars were a luxury for the few, Ford sought to change that by building a car “that even his own factory workers could afford.” Doing that required a comprehensive pricing strategy which led to breakthroughs in design, manufacturing and labor management in the following ways:

• Design: the model T was standardized and only available in black. Ford is famous for saying that “any customer can have a car painted any color that he wants so long as it is black.”
• Manufacturing: overhauls in the modern assembly made mass production of cars more possible than ever.
• Labor Management: the $5 workday - a wage substantially above the prevailing standards of the time. Ford stated, “We believe in making 25,000 men prosperous and contented rather than follow the plan of making a few slave drivers in our establishment multi-millionaires” making it possible for factory workers themselves to buy Ford’s cars.
  From https://corporate.ford.com/articles/history/moving-assembly-line.html

In 1910 before the Model T, only X owned cars. The “Swiss Army Knife of automobiles” changed the landscape of car ownership and in 1925 1 in 5 Americans were car owners.

Ford not only set out to capture market share but to expand the size of the market and to do it drastically.

So many other major examples of this from recent memory include the dissemination of laptops and smartphones, first in the hands of the rich few to becoming necessities. The path that products take from being luxury symbols to becoming necessities seems to require overhauls of the business infrastructures developing them with the end result seeming as simple as a lower price.

So when does has this happened in reverse? Haircut prices have skyrocketed above 27% from 2019 to 2024. Additionally, services that were previously free of charge now come at a cost to consumers like a shampoo and blow-dry. This is shaping American behavior in the following ways:

• Women are now washing their own hair before hair appointments
• Skipping a blow-dry after their cut
• Reducing frequency of cuts and color services

And as my friend above shared, some are even taking a stab at the art of cutting and coloring their own hair.

Resources:

• https://www.wsj.com/lifestyle/hair-salons-rising-prices-9d499b41?gaa_at=eafs&gaa_n=ASWzDAgv4dUYIMoITh0_qOiUNvXMj4F2GSTowix1KkUteQ8Ef3galRc26MT4&gaa_sig=JNnlkhdA_lXEx8hOW5oQdFY4NZBzuDPcpwU27Bg4rzVBpOI340cYANq32CWDphWUQqLmbU3MSuyu5liqdz8ulw%3D%3D&gaa_ts=687c28e9&utm_source=chatgpt.com
• https://corporate.ford.com/articles/history/moving-assembly-line.html