You might say we are biased but we believer that pricing is one of the most important leavers of a successful business. The price determine your revenue, the type of clients you attract, the future growth of the business and much, much more.
Price Wars Ruin Healthy Industries
While sometimes pricing can work short term, in the long run going to war is a bad idea for all those involved. Have you heard of the coffee wars? A while ago, Kraft Canada and Procter&Gamble engaged in a price war to gain market share. Sadly, every time one company reduced prices to gain market share, the competitors matched the move so in the end a few things happened: first, the customers became brand agnostics and coffee became like another commodity.
Second and the coffee market dropped by almost 40% in dollar terms and experts are still working to recover from that.
Price Fixing is Illegal
Price fixing is illegal in many countries of the world and especially in the US as it puts the consumer at a disadvantage. Still there are other forms of collusion that are legal.
Nowadays, especially in consolidated industries, the main players signal their rate change and wait to see what their colleagues do. Price signaling works best in oligopolies dominated by several large players.
Still, one could argue that if one looks at a small market unit, that market becomes an oligopoly. For example, the Jewish New York Photography market is an oligopoly.
When a local photographer raises prices, her colleagues can either follow suit, or ignore the signal to raise prices. In such case the price increase initiator will most probably drop the price to the previous level until the price leader sends another signal by raising prices.
This strategy is often use in the telecom industry, courier, etc.
What is Prestige or Image Pricing
Prestige pricing or image pricing is a technique to raise prices above the market level to make customers believe that is a very valuable and high quality product or service.A highly priced service if considered more valuable than a cheaper product and pricing is seen as an indicator of quality.
The artificially inflated price is smoke and mirrors when it is not backed up by high quality. Why? Because the proponents of this method know that the high price will convince some buyers that the product or service is a luxury one.
Psychology Versus Reality
Prestige pricing is based on the normal psychological reaction for buyers to associate high prices with good quality. As such, even though part of the potential couples will shun the high prices, the brides who have a large budget will gravitate towards the vendors who offer "exceptional quality."
This phenomenon is even more predominant when the couple does not pay for their own wedding.
The Need For High End Brand
If you are a professional who thinks about launching a high end brand, ask yourself if there is a need for that. Are you knowledgeable about the marketplace and you are absolutely certain the market can tolerate such high prices?
Unique Services vs. Commodities
Are you acting in an arena where you are just another player and your clients cannot differentiate your services from the others? In that case, you offer a commodity and will need to compete of pricing. For many decades oil companies tried to differentiate gas but customers ultimately decide based on price. Gas is a commodity and no matter of the brand, the vehicle will drive the same way.
On the other hand, are you able to create a unique value proposition and be different? If the answer is yes, by all means go ahead and launch your new business! We wish you best of luck in your new adventure and may the force be with you!
Experience vs. Products and Services
High end brands sell you experiences, not products and services. When you buy a $6 coffee from Starbucks, it is no better than the one sold by McDonalds. In fact, in blind tests McDonalds coffee beat Starbucks by far!
However, Starbucks does not sell you coffee, but an experience. Apple, besides the great products sells you an experience.
To launch a successful high end wedding brand, stop worrying about the service and think about the experience you want to offer.
Prestige Pricing in Action
Let's say you are a Manhattan wedding photographer. We know that the average wedding photography price in New York is between $3,500 and $6,500.
However, you decide to set your prices between $10,000 and $20,000. Your work is good and you have a few awards under your belt. As such, you redesign your website and make it look like a luxury brand. After this move chances are that for a while all your referral business will disappear.
However, the new couples will bring in business and the new prices will work and provide several advantages.
As the direct costs are similar among wedding photographers, the prestige price drives increased profitability. As such, the professional can now rent a high end studio in Manhattan to contribute to the high end image of her brand.
Please note that to maintain the luxury brand ecosystem, the artist must increase marketing spending. Advertising in high end print and online bridal magazines, participation to expensive bridal shows, etc. are essential.
Sustainable Competitive Advantage
While other photographers can copy the the poses and lighting, the look and feel of the imagery the brand is impossible to be copied as it has its own personality.
Think about a brand as an animal and define its attributes. A high end brand is proud, creative, exclusive, unyielding, etc.
Any new entrant into the space needs to undergo the same transformation and invest the similar energy and money to survive and thrive.
Improved Brand Awareness
Because of its omnipresence in the various media, the high end brand become an aspiration one and more people talk about it. As the buzz grows, more and more people become accustomed to the brand and that organically increases brand awareness.
It is important to mention that there are a few disadvantages associated to this high end pricing strategy.
Increased Marketing Costs
To maintain the image of a luxury service, the photographer needs to advertise in high end media and they are generally more expensive then the mainstream channels.
The customers are significantly more likely to purchase this photographer's services if they are familiar with the brand.
As such, her packages should be priced high enough or the number of weddings photographed should be sufficient so they cover the additional marketing expenses.
You Need to Differentiate Your Service
Are you a New York City photographer whose images look the same as those of the others? Unless your photos need to stand out. Maybe you need to capture more moments and emotions. Every day pay attention to what your clients desire, what makes them click and what turns them off.
A high end bride wants to look at her photo album and remember the emotions you managed to capture masterfully on her big day, not a series of poses regurgitated from other artists.
Unfortunately, if you are not able to differentiate your services from the crowd, you will be unsuccessful. After all, who will pay double the money for the same services?
Observe Fashion, Car and Electronic Luxury Brands
Luxury brands know what works and what doesn't and guess what? Your service and those brands have a similar target market.
Learn how they attract the female clientele (your main purchasing decision maker), how they package their goods, what their experience is and how they present their prices. If you are able to successfully mimic the feel of such brands, you will have a thriving business.
If you are a wedding service provider who are able to differentiate from the competition, you should look into launching a premium brand. Price it above the average market, invest in marketing and image and reap the benefits of a successful business!