Find the best profit margin if you are selling hair extensions

The only thing online visitors can compare is price.

New visitors of your webstore can only compare your price to decide if they want to buy. They can not feel if your Cambodian hair feels more silkier and will last longer, than the hair from others. A survey performed by IBM showed that 70% of the people online scan sites only to compare prices. You need to have the best pricing strategy to make sure you earn enough and get the highest level of sales. You analysed your Ideal Client and you know what she wants, but what pricing strategy will you follow? How to get the best profit margin, for your extensions, wigs or bundle deals? If you price your hair too high, you will lose potential clients who love your hair. But if you price your hair too low people might doubt the quality, or you lose money.

Follow a pricing strategy for hair extensions

There is not one answer, but you need to follow a strategy to determine the best price. A strategy that, takes into account the average cost of hair extensions, allows room for experiments and time to learn what is the best price for your hair extensions.

What is the price of hair?

There are a lot of people looking for ways to make money in the hair industry.
Some want to make fast money and look for cheap hair and are happy with one deal per client. Others sell used hair extensions to they have collected for free from people who buy new extensions. And others invest in a relationship with their clients and always look for the best balance between quality and price of the hair. You can decide what is the best way to make money in the hair industry. I prefer the last one, how about you?

Purchase price

It all starts with the same question your ideal clients have, what is the price of hair? But you also know, there is not one price of hair. The price depends on the inches for weaves, the texture for hair extensions and the color and treatment. And of course, a very important factor is the wholesale pricing strategy. What is the strategy of the vendor? If they are new on the market, they can sell the hair at a discount¸ or when they predict lace for closures will increase, they can change their price in advance.

All this together gives the price of the hair, and to understand this is important to know how to make profit in a hair business. To know how much does it cost to get hair extensions for your clients, plan regular online visit to your competitors and wholesale vendors. You need to know the evolution of the prices in the market. Thanks to Covid-19 we have learned how volatile prices can be. Are your prices still in line with other hair stores?

How much should I charge to make a wig?

Before we dive into the different hair pricing strategies, it is important to know if you make wigs, the pricing is different from other hair pieces. Look into the post about how much to charge to make a wig. Because this time you need to consider the time and production costs before you can calculate a price. And you should consider a wholesale versus a retail price formula when you make wigs for salons instead for only private individuals. When you also sell wholesale, you need to calculate a price that allows your reseller, the salon or online store, to make a good profit margin.

7 Different kind of pricing strategies

There are seven pricing strategies you can apply, single or combined.

Basic Pricing Strategy for Hair Extensions

The basic method is simply to add a percentage on top of the purchase price of the hair extensions. You buy the hair from a wholesaler and you add a percentage to cover the other expenses. Expenses like rental, office supplies, packaging, web hosting, accountant and of course the shipping and payment charges.

Calculate the Mark Up

To calculate the mark up (the percentage you are going to add on top of your purchase price) make a list with all expenditures. The ones you paid already but also the expenses that only occur once a year, like your tax control. Calculate or make a best guess of these expenses for a whole year and divide these expenses over your total sales. This will give you a percentage that will cover all your expenses. Now you can add an additional percentage for your profit, the reward for the hours you work in your hair store and the compensation for the risk you take.

Congratulations now you have the first possible retail price for your hair extensions!

Suggested Retail Price for Hair Extensions

If your wholesaler has a good understanding of the (local) hair market, they will be able to suggest a retail price for the hair extensions they offer. This helps you to set a retail price your clients might feel is acceptable, and in line with other hair resellers. But if you offer the same price as the competition, how will you be able to differentiate yourself?

My recommendation is to ask your wholesaler for their suggested Retail Price for your country, because this will give you a good benchmark to measure your other Hair Pricing Strategies against. If you deviate to much above or below the Suggested Retail Price for Hair Extensions, you should analyse the reason for the deviation and decide if you will adapt your price, up or downwards.

Bundle Pricing Strategy for Hair Extensions

A successful and often used pricing strategy is to bundle several hair extensions. You can offer 16-inch, 18 inches and 20-inch Brazilian Body Wave with all a separate price tag. But for the Bundle price you add these three lengths of Body Wave in one package or bundle and offer this at one price. Big chance your clients already consider purchasing different lengths of the hair and now you make the buying process easier for them. They can see right away the money they have to pay to buy everything they need. You take away one blocking question from their mind “How much will this cost me?”. Now they can fully concentrate on the hair, texture and color.

Discount Pricing Strategy for Hair Extensions

We all love special offers, discount and sales and your clients will not be an exemption. You could consider giving away some of the price by offering a coupon with a discount. This will help you to understand if your original retail price, calculated using the Basic or suggested Pricing Strategy for Hair Extensions, is acceptable for your own ideal client.

No need to lower the retail price of all your hair extensions but you can experiment to learn client’s behaviour on the pricing.

Be aware, clients like low prices and they easily get used to it. If you are known for interesting discount coupons or special prices (low), the market might postpone their buying decisions until you offer a lower price again. And you do not want to compete only on price, do you?

Loss Leader Pricing Strategy for Hair Extensions

This strategy will lure clients to your hair store with an offer nobody can resist, a too good to be true offer. “High quality Body Wave for a super low price! “

Now this pricing strategy requires you stay focused all the time, because the idea is not you will end up with a loss! Not only should you carefully select the hair extensions you want to sell at a ridiculously low price, you should also present other hair pieces, extensions or hair care products with a good profit margin within sight of your clients.

Right value for clients

The Loss Leader Pricing Strategy for Hair Extensions take advantage of the habit most clients have, they are sensitive for the right value and they want the process to solve their needs, in this case great looking hair, to be easy. With a Loss Leader Pricing Strategy, you will have to offer both, hair at the right value and an easy shopping experience.

How to avoid you will only sell your best product below cost price? A great protective strategy could be to offer special super interesting retail prices only to returning customers. A loyalty program that will allow your most loyal clients to benefit from the relation they have with your store. This will also help new clients to buy more often in your store. For this you must communicate well the advantages it brings to returning clients.

The number 9 Pricing Strategy for Hair Extensions

Use the number 9 in your retail price to convince people to buy your hair. Regardless how much they like your hair, most clients have plenty of alternatives to spend their money on. So, they must spend it wisely. If they must choose between $ 10 or $ 9,99, they will go for the latter. Only one cent difference but for you the difference between a sale or a missed opportunity.

The great thing is, this trigger to look for the lower price is hard wired in our brains, it gives us a nice feeling when we buy what we want and make a bargain on top! Indeed, even if the difference is only 1 cent!

Benchmark Pricing Strategy for Hair Extensions

You are not the only one selling hair, and your clients are fully aware of this. Because of this you should always include in your Pricing Strategy for Hair Extensions the competition.

Even if it is not easy to compare the quality of the hair without feeling and touching it, even online people will compare the hair from different stores and use the price to make a buying decision. For this you must keep an eye on the competition, even if they sell bad hair. The Benchmark Pricing Strategy for Hair Extensions means you use the price set by the competition and sell at a higher or lower price.

Again, you need to stay on top of your business, negotiate a lower price with your wholesale supplier and be very critical on the business expenses. This will allow you to sell at a price below the competition but still making nice money.

However, if you aim at the high end of the market and you have a luxury hair brand, you might consider pricing your hair above the price offered by the competition.

Get help with Your Pricing Strategy

I recommend experimenting with the different pricing strategies and to monitor client’s behaviour after every change. Do not overdo the experiment, every week another price will not help but you can select certain products for an experiment. Use Google Analytics and record every change of price, not only for your own store, but also the competition.

If you need support in setting the right price strategy, or to change the prices of your hair products. Feel free to contact me as your coach or operational support