Tourism operators and organizations that attend training by Todd, Celes and I will here us talk often about value pricing with experiences. Know ideal guest, what is important, meaningful and relevant to them, then set your prices accordingly. This is not a one-shoe fits all approach, but like customized to each ‘audience cluster’.
Dr. Rafi Mohammed, author of the 1% windfall: How Successful Companies Use Price to Profit and Grow, gives a few things to think about — and if they resonate with you – hop on line and buy the book! In a nutshell, a study of 1200 companies “Found that if companies increased prices by just 1% and demand remained constant, on average operating profits would increase by 11%”. Now this book is not written for the tourism industry, but I do like the cross fertilization of ideas and thinking and in his blog “10 tips for better pricing” he talks about a few that we also teach at the Gros Morne Institute for Sustainable Tourism in our Experiential Travel Training Course
1. Stop marketing up costs and set prices that capture value.
2. Create a value statement — and I would go a step further and make sure it is aligned with the customer experience statement.
3. Let people know that is is okay to earn profits, or high profits. Remember, often we are not our customer, so avoid thinking “I wouldn’t pay that price” … most people wouldn’t for a tourism experience in their home town, but on that exciting vacation, or once-in-a-lifetime trip, the purse strings do tend to open up!
4. Be careful with discounting – but understand different customers have different pricing needs — again it comes down to knowing your ideal guest.
5. Offer different ‘product versions’ and differentiated pricing … also known at the “Edge” as tweaking for different audiences, different guests. The experience you sell to the cruise line for an shore excursion may not the be the same as the local VFR (visiting friends and relatives) traveller, but inevitably you will be using some core assets and attributes of your company/community.
That being said – why calculate costs – because knowing your margins is an important measure of success. The message here is not to be formula driven, but customer driven.
Happy pricing.
