“What is pricing?!”
“How does pricing work with my business structure?”
Pricing opportunities are everywhere, yet they sometimes seem to be completely ignored when they could easily make or break a business.
Everywhere I look, I see these opportunities. My dry cleaner uses pen and paper for its order tracking system, and I wonder why they don’t offer price/product differentiation. Instead of a single price offered to get clothes dry cleaned, they could offer a tiered service at a premium. My gym next door is usually empty on weekdays at 10am, so they could offer a weekday 8-5 membership at a discounted rate.
Consider the travel industry, where many airline, hotel and cruise businesses share similar customer numbers. Larger hotels leverage revenue management solutions to better their business, but boutique hotels can take advantage of this too. Online travel agencies or global distribution systems all have access to these boutique hotels’ inventory information. Why haven’t they offered to handle their revenue management needs for a fee?
There are many opportunities within various industries to leverage the power of pricing solutions, but many do not. Why?
One reason is the concern about complexities of pricing education. That can be quelled with knowledge about education offerings and the many available pricing solutions. Small changes in price can lead to huge increases in profitability, which has been demonstrated and well documented numerous times.
What is the risk involved in offering a better product at a higher price? You can also estimate the potential gain from offering speedier dry cleaning services for a fee by gathering information about customers who request quicker turnaround times. In the case of the gym membership, it should be very easy to observe from check-in data that your gym floor is fairly empty on weekdays. Understanding the value in mitigating risk may require investing in new technologies and pricing education, but the investments reap large rewards in the end (revenue increase).
Companies only need vision, a continued interest in the changing technologies and data analysis, and the understanding that pricing is a critical component in business success.
How is your company levering the power of pricing? Leave us a comment below!