Warby Parker, the eyeglass startup with the funny name, was founded in 2010 by 4 MBAs Neil Blumenthal, Andrew Hunt, David Gilboa, and Jeffrey Raider. While in business school, the co-founders created the idea for the company and spent the time while in school to build the foundation for what would become a fast-growing brand and company valued at over $1 billion.
One of the key success factors attributed by Co-CEO Neil Blumenthal was their approach to pricing and the early work they did to make sure their pricing was right.
Influence Of Pricing On Warby Parker
Warby Parker’s co-founders were originally going to sell their glasses for $45. This price was substantially lower than the average pair of eyeglasses where according to the National Association of Vision Care Plans, the average cost of a pair of eyeglasses in the US is $263 making Warby Parker glasses a fraction of the price.
The thinking was to make the price low to attract more customers and differentiate from the competition. But two early factors influenced their decision on the price: the desire to create a premium brand and the feedback from their business school marketing professor.
Building An Affordable Premium Brand
From the beginning, the co-founders knew they wanted to create a brand around Warby Parker, not just a low price commodity. They had a clear idea of who their customer was – young, tech-aware, cares about style but not looking to break the bank to achieve it.
To connect with this segment and gain credibility, Warby Parker ensured at launch they were going to be associated with this style group by having features in leading style magazines such as GQ and Vogue.
Another core element of their brand is the social mission. For every pair of glasses sold, the company gives a pair to a person in need. While not a social enterprise, Warby Parker made sure they created a brand that also connected with customers who are socially aware.
Finding Pricing Smarter
While building a brand was critical to the vision of Warby Parker, so was price accessibility. One of the early problems the company set out to address was tackling the high prices led by eyewear behemoth Luxottica.
The company reviewed their pricing with their marketing professor Jagmohan Raju, an internationally recognized expert in pricing, and the feedback was clear, the price point was going to be perceived as too cheap. Customer will question the quality of the product and weaken the brand positioning. The professor also pointed out that the revenue generated with cause issues for funding other functions – namely marketing – for the business.
The team went back to work and tested numerous price-points through customer research. The result was increasing the price by more than 100% to $95 in hopes of establishing a high-quality product and making enough profit for marketing costs.
Warby Parker also understood that they had to defend their price by reducing resistance to purchasing eyeglasses online. If the customer felt unsure or uncomfortable buying eyeglasses online, then they would find the price ‘not worth it’.
To address this friction point, Warby Parker introduced try at home, where customers can select up to 5 frames to try on at home. A customer can then see what looks and feels right, return the trial glasses and then order online. Not only does this make buying eyeglasses easier, but it injects value into the price customers were paying.
Warby Parker’s early appreciation of the role pricing has on its brand, business model and customer satisfaction played an important role in setting up the company for growth. This early foundation has built up value with new and existing customers that enable the company to now not only increase prices of existing products but to introduce new lines at higher price points (now up to $145). The work the team put into research, test and manage pricing has created a unique competitive advantage for the company with the funny name, and an important lesson for entrepreneurs to learn from.