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UNIVERSITY OF ST.

LA SALLE
MBA 20X MARKETING MANAGEMENT
CASE STUDY: HAIR WORKS
Cordova, Vinson, Villaluz, Villarosa, Deles, Gaston, Clavecillas, Medallo

BACKGROUND OF THE CASE


In the 1990s hairdressing was a big and fast growing business in Hong Kong. More than 5,000 salons
caters to a potential market of 6 million people. Only a handful of elite salons caters to the high income
segment. Around 80% of the industry do not cater to the specialized hair care for men.
Stylists frequently switch allegiance between salons or branch out on their own after gaining enough
capital and a good number of loyal customers. Some salons would offer contracts to restrict switching and
further trainings (in the salons own school or hairdressing academies abroad) to the stylists for their
loyalty. It was noted that several stylists would advertise home service to attract more customers.
In the past, movies play and role in influencing the hairstyle of the people but when western influence
infiltrated the business sector, the hair trends evolve. The increasing purchasing power and living
standards led people to be more concerned of how they look. Coloring for men is mainly to cover their
white hair and old stereo types are afraid of to try coloring because they might appear feminine or vain.
However, in the younger generation coloring would connote that they are big spenders. Chinese women
are coloring their hair in a way they would never have done a few years ago and realizing they can get
away with it without looking cheap. As fashion continuous to change, coloring has become very
popular.
Although all major salons offer more or less the same kind of services they widely differ in terms of
various quality dimensions. More explicitly, quality is closely related to price. Most women customers of
leading salons are not just concerned about quality but also their emotional experience while in the
salon. Top salons clientele are willing to spend money when they are pampered with precious moments
of limited private time.

CASE FACTS
Personnel
Major Salons have relatively simple structure of three levels. (Shop Manager, Stylists, Trainees)
The consumer council noted that complaints in the industry nearly doubled to 143 in 1994 compared to 87
in 1993 ranging from unsatisfactory service to price misrepresentation and distortion.
Few salons systematically manage human resources since in general long term commitments were not
expected due to job-hopping.
Operations
Most top salons are open from Monday to Saturday and working hours are 9:00a.m. to 6:00p.m. Although
variations occur among salons.
Fridays and Saturdays have more customers.
In peak occasions stylists are fully booked and would double prices just like barbershops.
Locations
Top of the line salons are located in Central (Hong Kong Island) and Tsim Sha Tsui (Kowloon). Both
locations are in commercial business districts frequented by high spending power shoppers but the rent is
high.
In the near future, a major salon will branch out in Causeway Bay, a popular shopping area which is 2
miles from Central.
Services and Products

UNIVERSITY OF ST. LA SALLE


MBA 20X MARKETING MANAGEMENT
CASE STUDY: HAIR WORKS
Cordova, Vinson, Villaluz, Villarosa, Deles, Gaston, Clavecillas, Medallo
In addition to providing hairdressing services some salons would offer supplementary services. Other
salons sells accessories like faux and semi-precious jewelries, designer watchers, hair ornaments, silk
scarves and trendy satin ribbons.

CASE FACTS (Continued)


Pricing
Most superior salons followed premium pricing strategy depending on services, customer spending
power, data gathering (mainly from customers).
Prices ranged significantly among top Stylists and less so for trainees.
If the price of the stylist is too high and the delivered service is inconsistent with customer expectations,
dissatisfaction and loss of business might occur.
Advertising and Promotions
Advertising differs among salons. Some would advertise local fashion magazines while others would rely
on events like beauty pageants, fashion shows and competitions as sponsors.
Stylists believe in word-of-mouth and it is not necessary to pro-actively promote the salon.
Hair care and choosing a salon is a serious business for socialites, superstars and singers in Hong Kong
for it reflects on their personality and their lifestyle.
Industry
Divided into four basic segments: Street snippers (haircut HK$30-60), Middle to Upper Middle Class,
Middle to High Income, High Income market.
Le Salon and Rever have their own academies and wield substantial industry power.
Competitor Profile

UNIVERSITY OF ST. LA SALLE


MBA 20X MARKETING MANAGEMENT
CASE STUDY: HAIR WORKS
Cordova, Vinson, Villaluz, Villarosa, Deles, Gaston, Clavecillas, Medallo

CASE FACTS (Continued)


Rever is based in Tsim Sha Tsui with six outlets targeting mainly high class customers. But one salon
focused on a younger market offers a lower price. Located mainly in hotels and commercial areas in
Central, Wanchai, Causeway Bay and Tsim Sha Tsui. It is anticipated to open more branches in the near
future. The haircut in Rever ranges from HK$300 to KH$500. It periodically invite foreign professionals
to conduct seminars on latest hair styling skills and offer magazines and videos on modern trends.
In the past, Rever offers special rates to employees of large companies and sponsored fashion shows.
Consumer awareness decreased in recent years as promotional spending lowered.
To increase awareness and competitiveness, management need to invest more on promotions like
advertising in fashion magazines and in TV commercials.
Rever was recently registered as the sole Asian agent for hair extension.
To optimize profits, Rever partly need to increase supplementary services.
Le Salon Orients is the industry market leader in 1987 targeting high income mature customers. Although
it has only four stores but it is the most respected hair salon in Hong Kong. It is known for its attention to
physical facilities. It also offers beauty and body care treatment in their spas.
As an after sales service, it launched in 1994 a bi-annual newsletter Orient Vision to keep customers
informed on the latest hair, beauty and fashion trends.
The owners reputation attracted many superstars and performing artists patronage which secured a
favorable publicity in the magazines. The owners vision is to satisfy every woman in Asia and industry
sources believes that it will open in Singapore and Malaysia in 1996.

UNIVERSITY OF ST. LA SALLE


MBA 20X MARKETING MANAGEMENT
CASE STUDY: HAIR WORKS
Cordova, Vinson, Villaluz, Villarosa, Deles, Gaston, Clavecillas, Medallo
Headquarters was founded in the early 1980s as a family-sized hair salon in Kowloon Tong, 2 miles
away from commercial downtown Kowloon, serving expatriates and neighborhood clients with a
reputation for artistic and fashionable hairstyles. On lease expiration it moved to Tsim Sha Tsui. In 1992 it
was purchased by a diversified conglomerate operating jewelry shops, boutiques, coaching, catering and
entertainment services. By 1994, it operated two stores in a highly accessible commercial areas in Tsim
Sha Tsui (Kowloon) and Sheung Wan (Hong Kong Island), In 1995 it closed the Sheung Wan store and
moved to Central occupying a whole floor (6,500 sq. ft. est.) of the Entertainment building becoming the
largest scale hair salon in Hong Kong and the set up cost was reputed to be HK$4 million. Headquarters
customers high profile exposure served as walking advertisements and gained free publicity in high class
fashion magazines. It is the official hairdresser for Miss Hong Kong.
STATEMENT OF THE PROBLEM
Eddie Wong wants Hair Works to be a major player in the Top echelon hair salons and is in need of a
Marketing Management Strategy.
AREAS OF CONSIDERATION and ALTERNATIVE COURSES OF ACTIONS
1. Open a New Salon would entail many considerations like location, hiring stylists, financial
packages for employees, services to offer, pricing, advertisements and the like.
2. Buying an existing salon and upgrade it. Rever, Le Salon Orient and Headquarters are not for
sale. Although several solid, if not super top tier salons might be available but many changes
would be necessary.
3. Office Rental Index

4. Office Capital Value Index

UNIVERSITY OF ST. LA SALLE


MBA 20X MARKETING MANAGEMENT
CASE STUDY: HAIR WORKS
Cordova, Vinson, Villaluz, Villarosa, Deles, Gaston, Clavecillas, Medallo

5. Estimated Income of Top Tier Salons

6. Estimated Revenue from Hairdressing

UNIVERSITY OF ST. LA SALLE


MBA 20X MARKETING MANAGEMENT
CASE STUDY: HAIR WORKS
Cordova, Vinson, Villaluz, Villarosa, Deles, Gaston, Clavecillas, Medallo
CONCLUSIONS
The hairdressing industry is growing by more than 8.5% year on year as can be seen with the estimated
financial statements of the top tier salons. At the same the net income is growing by 14% year on year.
Mr. Eddie Wong knows that the hairdressing industry is a good investment and with a right Marketing
Strategy coupled with a substantial capitalization there is a big possibility that he can be a player in the
top tier.
As to whether putting up a new salon or buy an existing salon and upgrading it would depend on the salon
that is available for sale. What is important to consider is whether this solid hairdressing salon although
not in the top tier has the potential to challenge the Top 3 and if these salons are within the vicinity of the
commercial areas in Tsim Sha Tsui and Central.
RECOMMENDATIONS
The group believes that Mr. Eddie Wong has a big chance to be a player in the Top
tier if he will go all out to become a challenger by starting a whole new salon. He
needs to invest more than HK$4,000,000 to project an image of opulence in terms
of design and concept to attract the Elite and the superstars. However, he also
needs to attract the middle class to augment sales while he is still challenging the
Big 3.
As for the Marketing Strategy, it is important that this must be a game changing
plan like a two-level hairdressing salon. The first floor is for the middle class and all
those who want to be seen in the salon of the superstars. The second floor is for the
Elite and superstars where although there is a separate entrance but they can be
seen by those in the first floor as they go up. Price differentiation will play a crucial
role in segregating the two floors but must also be enticing for the middle class to
upgrade their preference just to be with the superstars. The location must be within
the vicinity of the Big 3 to encourage people to try and switch salons eventually. Mr.
Eddie Wong can also pirate and bring in skilled foreign hairstylists to enhance the
total message that connotes international standards. The promotional marketing
must be a 5-year plan anticipating the reaction of the Big 3. Most importantly to be
ready to buy out one of the Big 3 when the opportunity comes and make Hair Works
be a big player in the top tier of the hairdressing salons or finally be the No. 1
Hairdressing Salon in Hong Kong.