Pricing Your Services
By Laura Laaman
Most business owners in this industry open a pet care center because they enjoy being around pets. They look forward to happy pets and their owners. But they weren’t trained or don’t possess the skills of a top Chief Financial Officer (CFO). They aren’t thinking, “Yippee; I look forward to adjusting our prices frequently to sustain and grow this company.” Therefore, pricing is not analyzed as often as it is with other businesses.
Consider your favorite coffee shop. If it’s a chain, it almost certainly has the necessary talent depth and intellectual prowess to pay close attention to their costs (product, labor, overhead). Knowing their costs is the first step; understanding what their prices should be is the next step. The CFO works closely with the Chief Marketing Officer (CMO) to determine their competitive landscape and appropriate pricing. They also need to ensure the company demonstrates and communicates enough value to justify the new prices and differentiate themselves from lower–priced competition.
Unfortunately, a one, two, or five-location business can’t afford a qualified, full–time CFO or CMO. But even small businesses need to implement these sound pricing steps to remain profitable. As hardworking and dedicated as most owners are in this business, they don’t always have the expert financial acumen to run a truly successful business. The toll this deficiency creates is saddening; owners don’t create enough revenue to have a healthy business to pay themselves or their team members well.
Pricing Sends A Message To Prospects
Proven CFOs and CMOs recognize that pricing communicates the position of their business in the marketplace. Imagine going to a restaurant and seeing two cheeseburgers on the menu—one is $20 and the other is $15. You’ll make assumptions about the two burgers if there is no additional information included. You’ll assume the more expensive burger is better. How? Maybe larger, premium meat, or additional sides.
If you offer better quality care than your competitors but are priced lower, you’ll create market confusion. Humans, like dogs, are mammals, and we don’t do well when confused. So it’s important that your pricing matches the quality of service and care you provide. But wait; there’s more.
How Do I Know When & How Much To Raise Prices?
Determining the proper pricing for your company is complex. Products and services like pet care have elasticity curves that are not linear. There is no simple mathematical formula to describe the relationship. Normally there are areas of relative inelasticity and other areas of relative elasticity. It’s tough to test and know, particularly with services that are not totally commoditized, like pet care. Therefore, it’s important to have proven experience, judgment, and analysis.
- Price Too Low: you won’t have enough revenue, even if marketing and customer acquisition is working well.
- Price Too High: without appropriate service, branding, and reputation, you won’t be able to attract, convert, and retain enough customers to stay in business.
Before adjusting prices, many factors need to be considered, including the company’s number and types of enclosures, current occupancy, competitive capacity, location and offerings, market demographics, company reviews, and overall business model.
In many cases, increasing the prices without corresponding changes in marketing, branding, and customer acquisition process may cause damage including loss of customers, market share, occupancy, profit share, and future sale price to the next business owner.
Will I Lose Customers Over New Pricing?
Almost every business loses customers every day, even if they do nothing wrong. Why? People move, no longer need the same service, and let’s not forget all the pet issues that can impede the need for your services.
So depending on the scale of adjustment necessary, you may lose clients. That puts a burden on the owner and marketing efforts to bring in enough new clients to compensate for natural attrition and those who are unwilling or unable to pay a fair amount. Since most small or medium-sized companies don’t have these capabilities, they don’t adjust their prices appropriately.
Some Necessary Steps Prior To Adjusting Pricing
- Complete a thorough and comprehensive, competitive analysis
- Compare your company’s position to competitors (size, offerings, brand)
- Decide on new pricing• Ensure staff embrace the new pricing prior to release
- Communicate the new pricing effectively to your customers
Appropriate and profitable pricing is an important part of delivering quality care. I hope you make it a priority in your company.
If you’d like help determining and implementing effective pricing or help significantly increasing your revenue, go to http://www.OutstandingPetCare.com/Contact