Several studies have found that women are generally charged more than men for gender-targeted products such as clothing, toiletries and accessories. At a well-known UK clothing retailer, a basic white t-shirt for women costs £12 while it’s just £8 for men, a women’s haircut often costs twice the price of a men’s haircut, and a bottle of shampoo for women is typically much more expensive than a men’s shampoo.
While companies try to justify the price disparities with reasons such as the materials used or the time consumed (i.e. a women’s haircut takes longer than a men’s one), it is reasonable to assume that it all comes down to the difference in willingness-to-pay between genders. But hang on a second - why are women willing to pay more when they make less money than men do?
One way to explain this is the decision-making in households. Women tend to make the most purchase decisions in a household: that is, women will, in general, decide how the majority of the household income should be spent. Thus, it is not personal income that determines willingness-to-pay, but joint income and the proportion which is spent by the woman of the household.
Secondly, in some cases, female consumers value gender-based differentiation higher than men do. The term “pink tax” originates from homogenous products whose sole differentiator is the colour pink, such as razors, pens and blankets. After all, the female consumer could just purchase a blue razor and avoid paying the premium, but the value that is derived from the gender-based differentiator (that is, not buying what is perceived as a men’s product) is so high that they will pay a substantial premium for it.
In some cases, it’s the other way around. Men’s skincare products have been found to cost almost three times more. Men are willing to pay a high premium for this branding to avoid being considered feminine or metrosexual, even though the product is largely identical.
Price discrimination based on gender is illegal and, of course, is not to be encouraged. However, it does highlight just how powerful product differentiation can be, even for products that may initially be thought to be completely homogenous.
Read more about decommoditizing seemingly homogenous products.