Cost-Based Pricing Model:
This model calculates the cost associated with delivering a Laser Tattoo Removal Treatment, both fixed and variable, and then applies a mark-up.
There are obvious shortcomings to this approach, most notably that generally speaking, end-user pricing is dictated by what the market will bear. Simply applying a mark-up to costs may over-estimate, or worse yet, under-estimate the price a business should charge.
However, this is an important exercise for any business to undertake. Specifically, it is important to know, precisely, the costs, both fixed and variable, to deliver a treatment. Ignorance of these foundational details have caused many a business to fail.
Customer-Based Pricing Model:
This model calculates the price a customer would be willing to pay for a treatment. This requires a bit of research, but can yield real insight into your market opportunity. Additionally, this insight can be used when it is time to target and attract customers and will be useful in your Marketing efforts.
Here’s a simple approach to understanding this process. First, carefully think through all the different types of customers that you’ll perform treatments on. To be clear, if one type of customer is a soccer mom with a tattoo on the small of her back, another type of customer would not be another soccer mom with a tattoo on her ankle. Customer types are more broadly differentiated, or segmented, by their needs and requirements, how they respond to different advertising mediums, and how and what they are willing to pay. A good example might be Soccer Mom (Segment 1) versus Active Military personnel (Segment 2) versus someone seeking a tattoo lightening procedure for a new tattoo cover-up (Segment 3).
Each market segment will have difference needs of the treatment you will provide. As importantly, they will have different expectations of what they are willing to pay. We have consistently witnessed the most successful practices carefully select the customer segment that would maximize profitability, and then build their marketing programs, and in fact their business, around uniquely and thoughtfully targeting these customers. Sure, they’ll take every other customer that walks through their door. But this is the exception and not the rule. The rule is that they know exactly who will walk through their door, and in fact, they spend considerable money and energy making certain that every aspect of their business, including the price they charge, is specifically targeted to this customer segment.
Competition-Based Pricing Model:
This model seeks to understand what your competition charges for a treatment, and then price their offerings accordingly. This approach also requires research, yet yields great insight into your market opportunity. As with all models we’ve discussed, this insight can be used when it is time to target and attract customers and will be useful in your Marketing efforts.
To begin, first analyze your local market. Talk to your competition, ideally before they understand that you are, in fact, their competition. Find out how they price their treatments, and as importantly, why.
Understand the different types of practitioners in your area. Would you price your treatments at the same level as those provided by a Board-Certified Dermatologist? In the same way, would you price your three-wavelength EVO Q Plus treatment at the same price as a two-wavelength, older generation laser or a Ruby laser that has been on the market for at least a dozen years? Of course not. These are important differentiators to understand.
The branding of your Laser Tattoo Removal business is critical. Ask yourself the tough questions:
- Why would someone choose to do business with me instead of my competition?
- How do I most want to do business with?
- How can I best attract these customers?
- What are these customers, specifically, willing to pay for my services?
Remember, there are always customers who will seek the low-cost leader. This can be a very successful strategy… if you’re Walmart and you leverage economies of scale and world-class IT systems that allow tremendous profitability at very low prices. For most of us, however, this is a recipe for disaster. Take the time to understand your true costs, all of them, so you know what is profitable business, and what is not. Take the time to understand and differentiate the customer segments that are available to you. Build your business around active selection of the most profitable segments possible. Lastly, take the time to carefully understand your competition. Ask yourself the tough questions, most notably, why someone would choose to do business with you.
The bottom line:
Quanta has witnessed that the most successful Laser Tattoo Removal business take the time and energy to carefully evaluate critical issues such as the pricing of LTR treatments. There are three effective models for this evaluation:
- Cost-based Pricing Model,
- Customer-based Pricing Model, and
- Competition-based Pricing Model.