Thursday, January 22, 2009

Pricing Experiment by a Boulder Spa Sensorielle

One of the Boulder Net member, Jewl Petteway owns and operates Sensorielle spa in Boulder. As Jewl describes it,

We have been around for 4 years. We are a natural/organic holistic, wellbeing spa... Our treatments are based in nature. Our spa was built with non-toxic paints, and sustainable materials whenever possible.
What is interesting this time and differentiates this spa from others is their introduction of new pricing. Starting February 1st of 2009 Sensorielle is starting a daring pricing experiment they call, Pay-all-you-can pricing. In the recently conducted Boulder Employment Poll, around 25% reported as being unemployed. As the economic conditions deteriorates people starting to cut back on their spending. Even the de facto necessities like cable and Internet are getting cut, so it is no wonder that people will be cutting back on personal grooming and other spa expenses.

In the recent New York Times article it was stated that more of the tasks that are typically outsourced like coloring your hair and walking your dog are coming back home. While the upshot is people saving money on these tasks, every such service people do it themselves it takes away contribution to economic output.
All of these consumers could praise themselves for their newfound frugality in the midst of an economic downturn. But every step they take toward self-reliance — each shrub they prune themselves, each cupcake they bake from scratch — hurts the people and small businesses that have long provided these services professionally.
Sensorielle's Jewl says she realized that people will cut back on spa and related expenses. So she is trying to entice customers to come back by asking them to pay for the service what they value and what they can instead of the posted prices.
Let us help you feel great by offering our loving sanctuary to you.

We[Sensorielle] offer you professional, quality therapists and estheticians at a price you can afford. We offer a healing sanctuary where you can relax, get stress-relief, upliftment, beauty, happiness, and feel a great sense of overall well being. We ask in return that you pay what you truly can for our services.

It is a tricky pricing scheme but it is better than lowering prices to attract customers, because from what I see and read Sensorielle is a premium service and hence it should be offered at a premium price. Any price reduction now will not only signal inferior quality but also will make it very difficult to return to normal prices when the economy turns around.

We understand that a rational person, as defined by Microeconomics, will pay nothing more than the absolute minimum they have to. But as the field of behavioral economics show, people are not rational, they are Predictably Irrational. If the pricing and promotions brings about customers to the Spa, I bet that most will still pay closer to the list price.

What do you think? What will you pay when you visit their spa?

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