Raising prices to get more clients vs. demand-based prici...

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Tops Pricing

1. Background

This article is derived from interviews with 46 pigmentation artists, each boasting a minimum of four years of experience at the time of the research. The majority of these artists—36—hailed from countries within the European Union, with six additional from the UK and four from the US. The research primarily focused on customer acquisition, retention, and satisfaction. All participating artists provided services in powder brows, hairstrokes, microblading, or lip blush. Moreover, insights from the interviews were further evaluated by two senior digital marketing professionals from powderbrows.io, the digital marketing division of the Powderbrows.com Research Center.

This article explores the impact of raising prices or maintaining current price levels without substantial discounts as strategies to enhance the growth and profitability of one’s pigmentation business.

2. Raising prices

Marc Andreessen: "Raise Prices"

A legendary tech investor, Marc Andreessen, has stated one of the most famous 2-word business advice in history: "Raise Prices." He stated: "The No. 1 theme our companies have when they struggle is they are not charging enough for their product." He added: "They don't charge enough for their product to afford the sales and marketing required to get anybody to buy it. And so they can't afford to hire the sales rep to sell the product."

Andreessen argues that companies often struggle because they undervalue their product, pricing it too low. This may seem counterproductive - after all, wouldn't a lower price potentially attract a larger customer base? It's a common misconception that holds many businesses back. This certainly holds in the start-up world regarding certain types of business, but what about the brows and pigmentation business? Let us look at that next.

A Critical Look at Pricing

The adage, "Want better customers, raise your prices," has been circulating in the pigmentation business, touted as a magic formula for success. It has become a popular narrative among trainers and artists, especially those promoting their training and linking the acquisition of their certificate with a potential increase in an artist's earnings. However, examining this statement and understanding its nuances is essential.

Firstly, let's decipher the phrase itself. The key lies in "better customers," not "first customers." This implies that higher prices attract a clientele with more discretionary income, who appreciate the value provided and are less likely to quibble over costs. However, this doesn't necessarily translate to attracting your initial clientele.

The Misconception of Pricing

When an artist struggles to establish a customer base, implying a correlation between low prices and a lack of clients can be ironic, even absurd. The assumption that a professional artist with excellent skills, impressive before-and-after photos, and an active social media presence attracts fewer clients due to low pricing is inherently flawed.

In most scenarios, if an artist provides high-quality services, the lower price would not be perceived as an indicator of lower quality. Only a very minuscule segment of clients might equate low prices with subpar services. Even such clients, if given a high initial price followed by a discount, would be more likely to feel elated about the deal rather than doubtful about the service quality.

Key conclusions from applying “Raise prices” in brow business

In the realm of the pigmentation business, such as creating powder brows, straightforward comparisons with startup entities that predominantly engage in B2B transactions are not feasible. The counsel to "Raise prices" as a mechanism to foster growth monetization is not readily adaptable to the nuances of the brow business, particularly during its nascent stages.

This strategy, while prevalent in the training modules offered by numerous educators in the field, does not directly address the quintessential challenges of engagement and client acquisition faced by emerging enterprises in the pigmentation sector, including services like powder brows, hairstrokes, microblading, or lip blush. Empirical evidence further elucidates that increasing prices does not inherently resolve the fundamental issues of attracting and retaining clientele, especially for those businesses in the embryonic stage of their development.

Moreover, comprehensive empirical research substantiates that adopting lower pricing strategies - when articulately justified by the artist through promotional campaigns, demand-based pricing models, or bundled offerings - does not automatically lead to a perception of diminished quality among potential clients. A multifaceted array of factors influences customers' perceptions of quality, with pricing being one component among many. Therefore, it becomes imperative for artists and businesses within this industry to consider a holistic approach to pricing and value proposition, which transcends simplistic equations of price to quality and emphasizes the comprehensive value delivered through skill, experience, and customer satisfaction.

3. Early stages pricing

The Pricing Misconception in Early Stages

Starting your career as a brow artist can be challenging and filled with potential pitfalls and misconceptions. A prevalent belief is that "higher pricing equals better visibility and earnings." But this logic is fundamentally flawed when you're at the dawn of your career.

The real issue in the initial stages isn't pricing; it's visibility, reach, and engagement. Raising your prices is not a magic solution that can skyrocket your business from obscurity to the limelight. Rather, it's an aspect of business strategy that optimizes client conversion once a solid customer base has been established.

When you're struggling to gain traction in the market, raising your prices doesn't automatically enhance your visibility or outreach. From an economic perspective, it could diminish the probability of establishing your initial customer base.

When does Pricing become relevant

Understanding the Role of Pricing Questions in the Business Lifecycle. Pricing becomes pertinent only when there is a proven "product-market" fit. Only when your services meet a customer need, and you see a steady stream of clientele should you consider adjusting your prices.

Pricing adjustments should be a strategic decision in response to market demand, the value of your services, and your business growth - not a desperate attempt to kickstart your business. It is crucial to understand that pricing is not a magical key to generating product market fit; instead, it's a tool for optimizing client conversion and business growth once a solid foundation has been laid.

4. Cautious Optimism

Approaching Pricing with Skepticism

As an emerging brow artist, it pays to approach "raising prices" with a healthy dose of skepticism. Don't view it as the golden key to unlocking success in the brow business. Instead, focus on refining your skills, increasing your visibility, intriguing the people interested, and engaging potential first clients.

Building a successful business involves more than just setting prices - communicating the value you can create for your clients, mastering your craft, and strategically marketing your services. Only then should pricing come into the equation, serving as an optimization tool for client conversion and business growth.

Price Flexibility in Early Stages

Pricing should be more flexible than rigid in the initial stages of your brow artist career. The primary goal is to attract as many clients as possible to build a strong customer base. Offering discounts, bundle deals, and other creative pricing strategies is fine.

Phrases like "get a third procedure free with any two" could sound more appealing than a direct price reduction. Such strategies can entice potential clients and generate much-needed business. At this stage, aggressive waiting and raising prices without having a solid clientele base would only lead to frustration rather than growth.

5. Price Advantage is not a Joke

Harnessing Price Advantage: The Art of Pricing Strategically

Once you have a steady stream of clients, the power of pricing becomes increasingly relevant. An artist with a cost advantage - perhaps because she owns the salon and thus has lower fixed costs - can leverage this to provide competitive pricing while still making a profit.

This is nothing to be ashamed of, rather it's a strategy that many successful businesses employ. In such a case, it becomes crucial to fine-tune the price to maximize profit without driving away existing clients.

Optimizing Pricing for Business Growth

After establishing a solid client base and a stable business flow, it's time to evaluate your pricing strategy critically. You might find that by slightly adjusting the prices, you could improve your profit margin without affecting client inflow.

Remember, this isn't about drastic price hikes but fine-tuning the pricing mechanism. Strategic price adjustments based on careful analysis and understanding of your business can lead to sustainable growth and profitability.

The key takeaways

Addressing the pricing strategy in the pigmentation industry, particularly within the brow sector, necessitates a nuanced understanding of timing and context. It's premature to consider "fine-tuning" pricing strategies or opting for price increases without consistent client inflow. This industry is notably characterized by its low rate of repeat business for the same procedures. Paradoxically, the more skilled the artist, the less likely they are to see immediate, short- to mid-term repeat business from the same client for identical services. This starkly contrasts to sectors like nail and eyelash services, where repeat business is intrinsically woven into the business model from the outset.

The essential takeaway is the stark lack of empirical evidence supporting higher prices directly correlate with increased customer demand. Assertions made by some trainers and artists that suggest otherwise are, at best, founded on hopeful conjecture rather than any concrete economic principle. Such claims counter the foundational laws of supply and demand, illustrating a misunderstanding of market dynamics within the cosmetic industry. In reality, successful pricing strategies consider not just the cost of service but also the perceived value to the customer, market positioning, and competitive landscape. Understanding these aspects is crucial for any artist or business owner in the PMU industry aiming to navigate pricing complexities effectively.

6. DBP - Demand-Based Pricing

In the wake of what has been termed the "PMU Apocalypse" post-2023, many artists within the permanent makeup (PMU) industry have significantly adjusted their pricing strategies, moving towards Demand-Based Pricing (DBP). This shift reflects a more dynamic approach to pricing, allowing for fluctuations based on demand. This methodology is transparently communicated to clients, underscoring that even the rates of the most seasoned professionals can vary in response to market demand, and there's no need to obscure this fact from customers.

Strategic Explanation

The rationale behind adopting such a flexible pricing model is grounded in the diverse quality of services offered within the same category (e.g., powder brows, microblading, hairstrokes, lip blush) by different artists. This diversity presents a legitimate basis for certain artists to command higher service prices.

A vs. B Scenarios

To elucidate, consider a scenario where two artists, A and B, offer the same service but at different levels of quality and price. A compelling argument can be made for why Artist A, charging 25% more, provides better value. This justification typically revolves around differentiating factors such as superior pigments, tools, techniques, location, warranties, etc., that Artist A provides. The key here is ensuring these differentiators are perceivable and meaningful to the client, justifying the higher cost.

However, the situation becomes more complex when there's no discernible quality difference between Artists A and B, with the only variance being the price. We encounter two distinct dynamics if both deliver the same level of service with identical professionalism. These will be discussed in the following section, highlighting the intricacies of navigating pricing strategies in a highly competitive landscape without compromising on service quality or professional integrity.

Truth Always Wins

When an artist lowers their prices due to reduced demand, leading to potential vacancies and idle time, there's a genuine and transparent reason behind adjusting prices based on the current market demand. Acknowledging a demand-based pricing model and openly communicating about price fluctuations can offer a price advantage and underscore the artist's commitment to honesty.

In scenarios where competing artists provide services of comparable quality, and one opts for lower pricing based on rational, demand-driven analysis (akin to Uber's pricing model), the justification for maintaining higher prices becomes scrutinized. The defense for higher pricing might often be predicated on claims that don't hold up under objective evaluation. For instance, claims of utilizing superior European pigments, advanced needle cartridges, or more sophisticated pigmentation techniques may not stand true. In reality, top artists within a region tend to achieve a similar mastery level over their craft, and significant differences in equipment, supplies, or techniques are rare.

The sincere insight derived from this analysis is that professional artists who embrace demand-based pricing and maintain transparency in their pricing strategy, avoiding the fabrication of unfounded justifications for their rates, are better positioned to attract customers during periods of lower demand and general economic downturns. This approach fosters trust between the artist and potential clients and aligns with ethical business practices, ultimately benefiting the artist's reputation and customer base in the long term.

7. Conclusions

A strategic pricing approach is essential for business growth and profitability in the pigmentation industry, particularly for services like powder brows, microblading, hairstrokes, or lip blush. Marc Andreessen's advice to "Raise Prices" may not directly apply in the early stages of a brow business, where establishing a client base and market visibility are paramount. Critical examination reveals that higher prices do not automatically attract "better customers" or guarantee initial client acquisition.

Demand-based pricing (DBP) has emerged as a flexible and transparent strategy, especially after the so-called "PMU Apocalypse" of 2023. This approach allows prices to fluctuate based on market demand, encouraging honesty in customer communication and providing a competitive edge without compromising service quality.

Key conclusions highlight the absence of empirical evidence linking higher prices with increased customer demand. Successful pricing strategies should focus on the value delivered, market positioning, and customer perception rather than solely on service costs. Early in one’s career, flexibility in pricing can attract a broader client base, with strategic price adjustments becoming more relevant as the business grows and a solid customer foundation is established.

Professionals adopting DBP and maintaining transparent communication about pricing strategies are better positioned to attract customers during lower-demand periods. This honesty fosters trust and aligns with ethical business practices, benefiting the artist’s reputation and long-term success. Thus, artists should navigate pricing complexities by emphasizing value, mastering their craft, and engaging effectively with their target market.

Raising prices to get more clients vs. demand-based pricing (DBP)

1. Background

2. Raising prices