We are launching a new service for the bride/wedding market. There is demand for this service, however, it does not yet exist in the market. For that reason, the customer has no price reference to compare from and then decide. How do we convince customers we offer a fair price and reduce price sensitivity?
What you are asking for has one simple answer: Marketing.
I assume however that you would want a more specific how to guide for such marketing efforts. I won't venture in giving you a ton of possible irrelevant examples but I would like start our conversation by saying that if there is no market demand and you do have a clever useful product you need to market the emotional need and consider why it hasn't been served. When you find that this is what you leverage.
You need to consider the first two rules of pricing here. Rule #1 - all value is subjective. That means while you think your service is fantastic, nothing like it, etc., ultimately it is the customer that determines value. They are the single point of failure for your product. The second rule of pricing is all value is contextual. That means you create and control the environment or context in which you product commands the price that it does. If you want to create a "fair price" environment, you need to communicate that to customers as part of your pricing communications strategy. This is easier to do when using cost-plus pricing than it is with value-based pricing. Have a look at EverLane's About page & infographic on their t-shirt pricing for some inspiration, and feel free to arrange a call if you want to chat further - Jon
The only real way that you are going to be able to determine whether your pricing will lead to sales is to run experiments with your customers. You should be testing all of your business model assumptions with customers in order to find your product market fit. Getting sales is not just about pricing, it is more complex. Your entire value proposition has to be spot on in order to generate sales and only your customers can tell you if they are willing to pay for your service and at what price (whether it is a new concept or not). Through running experiments you will soon determine what works and what does not. If you are not familiar with Lean Start-up I suggest that you read up on the approach as it will assist you in determining your product market fit that will in turn lead to the generation of sales. I would be happy to discuss this further.
Your service may be new but it must solve a problem, Right? People will accept prices that offer value.
Value = Perceived Cost of Not Buying – Price
The perceived cost of not buying refers to all costs, monetary, time, image, social costs, etc. Some may be harder to quantify and many will be subjective in the minds of different types of prospects.
For example, you may be willing to pay extra for milk at the corner store because of the perceived time cost of travelling to a supermarket which is further away. The convenience store provides value, even at a higher price, because they've relocated the product closer to where you are.
The corporate executive may travel in a private jet because he perceives a 'social cost' if the other bigwigs discover he 'flies commercial.' You get the idea.
You need to identify what the costs are for your prospects not to buy so that you can help define a value proposition for them.
I did this once with a junk removal business. We adopted the tag line 'enjoy the space you paid for' to reinforce the fact that every moment they did not hire us to remove their refuse, they could not use the space they were paying for. This was meant to highlight the perceived cost of not acting.
Hope this helps.
To sell them on the value is helping them to realize how your solution impacts one of more of the following areas: image, finance and/or productivity. When they understand they will have a better image (don't think just physical image), save money in the long run or be more productive during the hectic period of getting married, they will then correlate those benefits with your price point. In the wedding industry, it should be easy to tie your product features to all of the perceived benefits around image, finance and productivity.
That's an issue I deal with daily. In my case, people arrive expecting to pay $10 or $100 for a domain name; and I'm obliged to educate them by referencing related sales anywhere from $1,000 to $10,000,000.
We're all reluctant to spend larger amounts without a reference point. In the case of service costs, we can usually compare competitors' rates. Fortunately, you have no competitors! Therefore, you'll want to emphasize what you DO have:
You'll quickly establish yourself. Suppose I'm next in line but reluctant to pay. Showcase reviews! Show pictures! Emphasize that the real-world market wants what you offer and pays your fair price. Accentuate the fact that people like me DO hire you, which validates your price structure.
Nobody wants to be the guinea pig or look foolish all by himself / herself. There's safety in numbers.
You're facing a hard sell here for being first in market. You will need to convince your first clients that the money is worth investing by showing the benefits. It's very possible that you will have to make a deal for a lower price or even free for family and friends who can help you built a portfolio and provide testimonials.
Businesses that offer exceptional service progressively grow organically over time, without much marketing dollars, especially if you get to built a reputation that generate enough worth of mouth and referrals. Then, when you have a budget, you can think of investing in some marketing efforts.