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Do you really want a $3 haircut?

A few years ago, I went to a mall in Shanghai to get a haircut. The menu listed the haircuts according to the city where the hairstylist had trained.
Shanghai was 300 yuan, about $3. Singapore was 600 yaun, $6, Sydney was 1000 yuan or $10, and London topped the list at 2500, $25.

I splurged, and went with the London. My pleasant Chinese stylist spoke very good English  she had obviously, indeed, trained in London  and about six people ran around doing nice things for me. Three washed my hair, two brought me tea, and one gave me a shoulder rub.

It was a good haircut and a good example of the power of price. That was how I chose the London  simply because it was the most expensive, and I wanted quality. Price is an indicator of quality, often our first and often the signal that influences our decision the most.

As director of the Small Business Development Center, I meet with about 20 businesses a month  some small, some large, and a few start-ups. One exercise that helps them the most is a competitive map, where we sketch out how the market perceives the price and quality of the business and each of its competitors. It’s amazing to me how many companies believe that their own quality is actually much higher than what the market perceives, and yet they criticize their competition for being overpriced.

We also run into the occasional start-up whose business plan is to be known for higher quality and lower price. This is a tough plan to pull off. Human nature sees the least expensive option as the lowest quality.
Human nature goes with the London. We avoid the $3 haircut.

And you don’t have to go to Shanghai to figure that out. Go out for lunch in Mankato.

Mankato has several choices of Mexican food alone. I recently spent $17 on two Chipotle burritos and an order of chips, and was pleased with the value, even though it was much more expensive than anything I could have had at good old Madison Avenue Zanz (two cheese chilitos, please).

I was happy with my high-end burritos because they were high-end. In almost every dining category, there is a choice both in price, and value. What’s worth noting, for business owners, is how our perception of value is driven by price.

The $1 taco versus the $17 burrito meal. The $3 Shanghai haircut versus the $25 London. A well-coiffed, well-fed and happy Mike Nolan.

If you really have the highest quality, don’t you really want to say so with the highest price?