The Price of a Haircut

A haircut is a necessity (for most) and is a repeat activity which we get done periodically. I have moved to Tilburg and have found the price of a haircut to be quite high here. I paid EUR 29 which is a big amount for a student like myself. This got me thinking how a haircut should be priced and what factors determine the price.

Pricing of a haircut can be fixed in 2 ways:

Fixed Pricing: This is what most barbers follow. The price is fixed for a haircut and differences exist based on the gender of the customer. This pricing strategy has its pros and cons.

-     It guarantees a fixed revenue to the barber irrespective of the hair characteristics of the customer.

-     The problem is that some hair is longer and denser and hence more difficult and time taking to cut. Hence the ones with such hair are subsidized by the customers with shorter hair.

-     Also there is no choice for the customer. It is a take it or leave it strategy for the customer.

Variable Pricing: Here prices are set based on a time based rate. A price per minute can be set and based on the time taken to cut hair of a customer, the final price can be determined. A minimum final price can be set to ensure that atleast a minimum revenue is generated on every haircut.

-     The benefit of this strategy is that all customers pay based on the same rate and no cross subsidization takes place, as in the above case.

-     Also this pricing considers the value of the haircut to the customer in setting the final price. If a customer has longer hair or wants a more styled haircut which will take a longer time, he/she has to pay more.

-     The drawback of this strategy is that it based on trust and there can be a trust issue between the barber and the customer. A customer may feel that the barber is deliberately taking longer than required for the haircut.

-     Also understanding the customer’s requirements before the actual haircut takes time. This time needs to be somehow taken into account into the pricing. This will be tricky.

To summarise, a haircut pricing is also an interesting and important strategy for a barber and should be decided so as to create good value both for the barber and the customer.

Other than the pricing strategy, the level of pricing also matters. It depends on the following factors:

Brand: Big branded chain of barbers command a premium.

Facilities: The more facilities offered by a barber can justify a premium pricing for the outlet. Facilities can include a good waiting area, hygiene, latest equipment etc.

Positioning: A focused positioning or targeting a niche can also justify a premium price for a barber. An example is my barber here in Tilburg. This is a place called De MeesterBarbier which is a men’s only barber. All facilities and designs inside are structured to please their target market, i.e. men. There are men’s magazines, musical equipment, drinks etc. which create a great customer experience and hence they can charge the high price for the haircut.

How to Come Up With a New Product Idea?

Key Metrics in E-Invoicing

Key Metric – Network Effects

E-invoicing is conversion of manual invoices into electronic ones. Sending and receiving electronic invoices is great as it saves time and effort for businesses.

Sending and receiving invoices in the same format, automatic tracking of receivables and payables, reconciliation, alerts on bad debts etc. are some of the benefits for users. Hence, for a user to fully enjoy the benefits, stakeholders in the supply chain should also avail the e-invoicing option and hence network effects has a strong role to play.

Secondary Metric – Cost Savings

As mentioned above as well, electronic invoicing helps businesses save time, effort and cost and also tends reduce the risk of any errors in the invoicing process. However, there is an investment which a user must make in terms of time and effort to switch to the e-invoicing option. The long term cost and time savings will be the major factor which will push the user to do so.

Key Metric in Robo-Advisory

Key Metric – Roll Over Rate

Robo-advisors invest people’s money based on an algorithm. Getting users to try out the service may be achieved through marketing efforts, but getting users to stay invested is the key for building a sustainable business. Hence, the rolling over of investments is the key metric for any robo-advisory startup. 

Key Metrics in Crowdfunding

Key Metric – Number of Investors on the Platform

Crowdfunding connects projects and investors. Project owners would tend to list their ads on maximum number of platforms as it might increase their chances of raising money. However, what matters for a platform to be successful and result in conversions is the number of investors on the platform.

The greater the number of investors, more project owners would get lured to the platform, the higher would be the chances of conversion which would then result in positive spiral resulting in more investors and projects.

Secondary Metric – Ratio of Investors to Campaigns on the Platform

New projects tend to bring in new investors from their own network. However, for a project to be successfully funded, the investors existing on the platform should be sufficient to fund a large part of the project. Hence, for a platform to show a high campaign success rate, the ratio of investors to projects should be as high as possible. 

ADVISORY – Interesting Startup Trend for 2017

What is the winning formula for generating a business idea? Identify a problem and find a solution for it. Soon you see multiple startups in the rat race trying to offer better solutions to gain a share of the market. Now what this has led to is another problem, one which gets very little attention. For a user, there are so many options to choose from. Which one to go for?

This is where I feel an Advisor has a big role to play. An advisor, who should be the one in direct touch with user, has the responsibility of understanding the user’s exact requirement and suggesting products based on it. This decision making dilemma of users is the problem where the role of the advisor become useful. This, according to me, holds true for any industry, any requirement, B2B & B2C and so on.

Some issues I see with this model are:

Cost: An advisor needs to make money and this may add to the cost a user has to pay. However I feel finding a better solution for the problem might be more valuable than this cost for a user.

Conflict of Interest: This probably is a bigger problem and might lead to trust issues with the user. Some advisors might try to push those products where they get better commissions/make more money. This would be detrimental to the interest of the user. Giving independent and genuine advice is the need for a user and this must be the underlying premise for any advising service.

The OILS Framework for Growth Hacking

Growth Hacking is a now a commonly used term which basically involves generating growth in the most efficient and cost effective way. The idea is to come up with hacks which are focused and targeted to end users so as to get the best ROI on any resources spent.

The OILS Framework is a good way to come up with hacks which may aid growth of the business.

O – OLVP Definition: This involves defining the One Line Value Proposition of the company.

I – Identify Target Customer: Here based on the OLVP defined, the target customer is identified precisely.

L – Locate Customer: The above identified customer is analyzed and frequented locations and behavior is located.

S – Select Channels to Target: Based on the above locations identified, some channels are selected and targeted to reach out to these customers.

Hacks generated from the framework have to be tested and analyzed over time to judge the effectiveness and outcome of the same.

THE OLVP - One Line Value Proposition

An OLVP is a description of the offering of a startup in 1 sentence. If the OLVP is blur or cannot be written in 1 sentence, this tends to signal that there may be some ambiguity in what the startup has to offer to its customers.

An example of an OLVP is:



TransferWise: A money transfer service for immigrants to send money at cheaper rates.

Defining an Investor

Just like companies, investors are also different and have unique characteristics which define them. Companies looking to offer services or pitch to investors should understand the nature of the investor to have a better chance of being able to do so.

The following are the characteristics which define an investor:

Type of Investor: Individual or Institutional

If Institutional,

Structure of Firm: Type of firm, Organizational structure

Registration Details: Governing rules, Tax implications

Nature of Work: Personal investment or Investment company

Background of Team/Person: Skills, Experience

Risk Appetite: High/Medium/Low, Acceptable value at risk, Attitude towards loss (loss is bad, loss teaches you, its ok it happens)

Return Expectations: Any particular expectations, Goals in mind

Type of Investments: Ratio of investable amount to annual income (refer to Hierarchy of Personal Investments), Active or Passive investments, Time commitment, Term of investment

New Year Resolutions for Fintech for 2017

The year 2017 will play an important role in the growth of Fintech. Some of the resolutions which will drive growth in this area are:

Address security concerns & strengthen backend infrastructure – both in the transaction as well as the platform. Businesses involving online transfers of money such as e-payments, online money transfers and crowdfunding carry the most risk.

Scale to compete with incumbents – scale will lead to economies which will further drive competitiveness.

Adhere to new regulation – with the rise of Fintech, regulators are becoming active in order to stay ahead of the curve. Fintech startups must find the right balance between providing a value-added service and adhering to regulation.

Build a profitable business model – building a profitable business is a necessity as it is not possible to forceful tactics to drive incumbents out of the market.

Enhance customer experience by ensuring promises are delivered – to get a foot into this space, a very high standard of service is required.

Enhanced usage of the blockchain – the advantages of a distributed ledger must be utilized as a tool to deliver enhanced value and build differentiation.