Part Two: 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 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.
In the last post, we explored myth #1: Post your prices on your website and marketing material to reduce unqualified leads.
This weekend, we’re digging into myth #2: Set high minimums to make the most revenue during the busy times.
Communicating your “minimum price” can have unintended consequences, creating real problems for your business in the long term. It’s better to find alternative ways to take full advantage of high-demand dates in your business.
This is for sure: unless you’re turning away people at the door because you’re so busy, you don’t ever, ever want to be known for having a price that’s too high. Don’t be that place that nobody calls because they think it’s too expensive.
Keep in mind, what you think is fair market value is likely outrageously high for a newly engaged bride who’s just started looking for vendors.
Trust me, 90% of your prospects, even the wealthy ones, think your prices are high, simply because they do not have any experience with the value you offer. How many brides-to-be have sent out invitations to 300 people? How many have bought a dinner for 300 people in one sitting? How many have rented high-end furniture with enough seating to accommodate 10 living rooms? How many have paid a team of people to travel to a place and work for them for a week? The simple fact is they can’t believe it costs this much to get married.
Do yourself a favor, don’t “educate” them on how much weddings cost. The messenger usually doesn’t fair well when sharing bad news. Instead, stay focused on loading down the value proposition with all the incredible things you are going to provide and ways you are going to make her feel like the most important and beautiful person in the world for 10 hours of her life.
Even worse than you telling people your minimum prices is other talking about your minimum prices. You know that game we all played in elementary school, the “telephone game?” You whisper something to someone and they whisper it to the next person and it keeps going along till it gets back to you and it’s completely different than what you originally said?
Yeah, that’s how pricing works in a highly word-of-mouth market like the event space. (“I heard they charge $12,000 for their basic, minimum service.” “Really, for day-of coordination?” “I don’t know that’s what I heard their planning prices are.”) So, unless you are using penetration pricing to gain a toe-hold in the market or employing a loss leader to sell more to the same client in the long-term, you don’t want people talking about your pricing. Period. People are going to get the price wrong or the date wrong or something else wrong when they communicate the minimum. Stay focused on the value you offer.
The real damage comes when the minimum price you quote to one prospect or vendor gets stuck in their mind as the price you charge for all dates, and now your peak pricing becomes your only pricing. Yikes. If your leads are drying up, this may be what’s causing that to happen.
Don’t get me wrong, the concept of charging more for your high-demand dates is a good idea, if you’re a venue, DJ, band, rental company, photographer, and others. But you must be clear with the people you are quoting your prices to that you are charging a premium for a certain date because it is in high demand.
I strongly recommend using the example of airline or hotel pricing, because everyone is aware of how it works for these industries. Just let your prospects know you only have so many “seats” to sell, and higher demand dates are more expensive than other times of the year/week.
Remember, the foundation for “minimum pricing” is to get more for your high-demand dates. So why not just charge more for them? In general, the only people who should be using surge pricing like this are people who have a fixed supply of services for a given time period. If you are in this category, you shouldn’t post fixed prices for everyone to see, anyway. You should be flexible and nimble and adjust the pricing as needed, just as airlines and hotels do.
Demand-based pricing is founded largely on two points of data: 1) how much demand has occurred historically on a specific date, and 2) how much demand you’re actually seeing for the dates this year. To be clear, your pricing for dates six months down the line is only a best guess. Give yourself some fallback to change if you need to without having to look like you’re panicking by reducing prices publically, which causes other unintended ripple effects that hurt your business.
Obviously, there’s a lot to go over in this area. If you’ve got some thoughts on it, please leave a comment, below.