Do you make these pricing mistakes?

In my daily newspaper, a story that shows just how little even experienced business people know about pricing, value propositions and marketing. If you own a salon or spa and want to charge premium prices for your salon body treatments or hair styling, this story is a classic example of how not to do it – and a lesson in how you CAN do it.

A reader had written a glowing letter of praise for the magnificent quality of food and service at one of my city’s top restaurants. “Very stylish, with interesting, tasty and creative food.” he wrote. “The service was almost faultless too, thank you.” And then came the “….but.”

“A smallish plate of (beautifully cooked) pieces of suckling pig and a little bowl of sauerkraut was…$55. Oh, COME ON…! Is this just cynicism? Do you just think people will pay this because they don’t want to be thought of as uncool by complaining…?”

The diner’s complaint was justified, because the restaurant had failed to justify its high price by providing value. And yet, that value was easily explained, had the restaurant’s management bothered to find out how to do so.

In fact, they had the answer at their fingertips. Yet they blew it. Sarcastically, they wrote to the customer thus:

“As far as going into detail and explaining our prices for you we won’t bother. We’re sure you don’t email big companies such as Calvin Klein or Armani and ask them to explain themselves for the expensive prices for a pair of jeans or a white T shirt.

“We serve good quality food that has had a lot of love and hard work go into it.”

Huh? As if other restaurants charging half the price serve lousy food thrown together by trained monkeys? Dumb. Yet they had the right answer at their fingertips. In the very same article, the restaurant’s part-owner and high-profile chef David Coomer detailed exactly the right justification for charging top dollar – yet, ignorantly, this brilliant sales information is presumably kept a secret from the company’s customers.

Each pig costs us about $180 to buy. It is air-freighted clear across the country from Victoria, and collected at Perth Airport by restaurant staff. By the time preparation, garnish and labour costs are added, it doesn’t leave much of a margin.

“If you were a rational restaurateur, you wouldn’t bother,” said Mr Coomer. “But we want to be perceived as people who are dedicated craftsmen serving very good quality food.”

Er, how on earth are they going to be perceived as dedicated craftsmen, if they don’t tell the story, shout it from every available rooftop. If I were Mr Coomer, I’d be instantly re-printing the menus, complete with the story of each and every dish. E.g.,

“For our suckling pig, we personally select only the best available animal from a specially-certified farm, approved by our part-owner and master-chef David Coomer, (name of farm?) in the cool highlands of sub-alpine Victoria. Each pig costs approximately $180. Most restaurant food supplies are trucked across the Nullarbor Plain to Perth, a distance of 2,500 miles, however we believe in only delivering the very best and freshest food to our diners, so instead of trucks, our animals are air freighted at a cost of $70 each. At Perth Airport, our restaurant staff personally meet each arriving aircraft to inspect the purchase and ensure it has arrived in perfect condition….”

Etc etc. You should by now be getting the picture. There is Magic in the Details

Too often – and this applies to salon & spa marketing as much as the marketing of any other business – the owner assumes that the customer has no interest in the process, only the end result. Nothing could be further from the truth. Hark unto me; there is case study after case study of smart entrepreneurs turning the actual process into a ‘business within the business’, not only generating another revenue stream, but using the process as means of not merely justifying the high prices of its products, but making the customer feel intensely excited about paying those high prices.

Case in point: premium European car manufacturers such as Mercedes and Porsche have erected massive museums in the grounds of their plants, tied to tours of the factory where customers can watch their car being built.

Schlitz beer – telling the story, revealing the DETAILS, turned Schlitz into the world’s biggest

Famous US brewer Schlitz was the biggest in the world for decades, thanks at least in part to advertising which – unlike other companies – extolled the process by which their beer was made. (See example on this page.)

There is much to be learned and even more to be implemented in your salon or spa business from this. Do you simply present your customers with the end product and assume they know how you arrived at that product? Is your method of pricing little more scientific than the ‘Flinch Test‘?

(Explanation: the Flinch Test is one of three common pricing methods used by all businesses. Method #1: Look around at what everybody else is charging, and take an average. Method #2: figure out what a product or service costs you, and simply add a margin. Method #3: stick any old price tag on the thing, and if the customers don’t flinch, keep pushing it up until they do.)

The restaurant had a magnificent story to tell, yet failed to do so, and its only defence against price criticism was arrogance. That’s not stupidity, it’s ignorance. There’s a difference. Stupidity is not being ignorant, it’s being ignorant and refusing to educate yourself despite an abundance of information at your fingertips.