Part 1: Five Pricing Tactics You Should Dump Immediately
Which of the following statements is true for your business?
a) “Post your prices on your website and marketing material to reduce unqualified leads.”
b) “Setting high minimums means you will make the most revenue during the busy times.”
c) “You should raise your rates every year.”
d) “Offering discounts or pricing below market cheapens your brand.”
e) “Prospects who negotiate during the booking process are not the right fit for your brand.”
Hint: None of them are unilaterally true for all businesses.
If you’ve been reading the past few weeks’ worth of blog posts, you know I’m not a big fan of a one-size-fits-all pricing plans. Pricing advice we receive usually comes in the form of “do this and you’ll realize the kinds of sales you want for your company,” but not all companies sell the same kind of stuff or are at the same development in their maturity cycle.
Here are some common myths I’ve heard spun to event professionals.
Post your prices on your website and marketing material to reduce unqualified leads.
If you do this, you will see a decrease in all leads, not just unqualified leads. I know first-hand. I made this mistake a few years ago, myself, when I was working for a venue/caterer at the time. I’d just finished a comp-set analysis including pricing for our catering menus. I wanted to tell prospects we were significantly less expensive for the same menu items than all of our competitors. So, I experimented on the website by posting entry-level menu prices, which were super low according to the research I’d done. “Starting at $56.95” was going to give us a ton more leads, I thought. Wrong. Our leads dried up. We had half as many as we did the same period the year before. Nothing else had really changed on the website – this was the only variable in the equation. After several weeks of data showing the terrible pattern was there to stay, I took down the pricing and immediately the leads shot back up. While we recovered new bookings later in the year, we had lost literally dozens of inquires and very likely some good pieces of business that we could have booked if I’d not introduced pricing so early in the sales process.
What happened? Sticker shock. New brides and grooms can’t fathom how the prime rib and salmon they get at the restaurant is nearly double the price when they get it on a catering menu – even at the same resort! If you’re in the venue or catering sector, you know what I’m talking about. If you’re in some other field within the event industry, the sticker shock is readily apparent, as well. $300 for a centerpiece? “Ridiculous. Whole Foods can do something for half that!” $1,000 for a photo album? “I can got to Shutterfly and make one for 25% of that price!” Newly engaged brides and grooms have almost idea what it costs to do a wedding.
Trust me, you don’t want to be the one to tell them how much it’s all going to cost. You’ll be the bad guy. I’ve heard some industry leaders say how they “educate” their prospects about what the real costs are for doing a wedding. Don’t do that. You’ll likely just scare them. If you put it on your website, they’ll hit the back button faster than you can say “Whoops, dumb move to post prices.” If you want to play teacher and break the news about pricing, you might also consider talking about how the wedding planning process is going to suck the air out of their relationship, make them argue more than they ever have, and pale in importance when their next major milestone in life (having a baby) comes around. You might as well just tell them they should elope, save all that money for their future kiddo’s college tuition, and then ask for $10,000 as a fee for saving them money in the long run. Or not. Remember, you’re there to help them, not scare them.
There are lots of other ways to reduce the number of unqualified leads you’re getting. First of all, quit bragging about getting too many leads. Really, who gets so many leads it seriously impacts their business in a negative way? Don’t blame some poor bride-to-be for following up on something you’ve made appealing to her. Second of all, turn some other dial to filter out poor matches for your business besides being lazy and posting prices.
The basic issue with putting out your prices too early in the sales process is that you have yet to build up the value proposition to demonstrate why your fees are reasonable for what you’re providing the client. Imagine a see-saw, with your price on one end and the benefits you give your client on the other. Your prospect needs to view this see-saw as level, or, if you’re doing it right, as weighted down by the benefits on one side and the price way up in the air on the other side of the see-saw. If you’ve not loaded down the benefits, then the price will be more and the prospect will not book your services.
I like to say you don’t need to get married on the first date when you’re booking a client. This is a dating experience, with you each trying on each other to see if it’s going to be a good fit. Most successful courtships don’t start with couples talking about money issues on the first date. In your lead-to-booking process, you shouldn’t talk money till much later in the process. Put out the value of what you offer, why you do what you do, how your process works and what benefits you offer that your competition does not. Build trust through responsiveness, appropriate candor, being on time, following up when you say you will, and respecting their pace in the process. Discover their real needs, not the ones they tell you, but the ones you know they need based on your wisdom and experience.
If you do talk about pricing, ask them if they have a budget number in mind to see if you’re in the same range. If you are, come up with a scope of work that you’re willing to offer that would meet their needs and your needs. Work to make it a win-win, and if it can’t be made tell them why, and then walk away knowing neither of you jumped to uninformed conclusions. Offer them insight and referrals to someone else who can provide what they’re looking for even if you can’t.
If you quote prices too early or too often, you may become known for something you’re not – being too expensive. You don’t want that. Ever. You can be expensive, but when you’re too expensive in the marketplace, people will stop inquiring about what value you offer to your clients. When that happens, you’re dead in the water.
We’ll review the other four myths in the coming days. Stay tuned.