Guest post by Jon Manning, Pricing Prophets
Two Pricing Consultants walk into a restaurant. They haven’t seen each other for a couple of years, so a bit of a celebration is in order, which also partly explains the choice of restaurant, which is run by one of the Australian judges of Masterchef (but will remain nameless).
The waitress shows them to their reserved table, informs them what the specials of the day are, and leaves them to mull over the rest of the menu and the wine list.
By the time the waitress returns to take the drinks order, the two Pricing Consultants have both opted for a glass of a $9 boutique beer, on tap, from South Australia. “Oh. I’m terribly sorry” the waitress replies. “That beer is not available. The beer tap stopped working this afternoon. These two [cheaper] beers are both available and on tap though”.
The waitress heads to the bar with their order, and the two Pricing Consultants look at each other with glazed, rolling eyes. You don’t have to be a rocket scientist (or a Pricing Consultant!) to work out what’s wrong with this scene.
Firstly, the tap dispensing the most expensive beer stopped working hours before the Pricing consultants arrived for dinner. From a revenue maximisation perspective, the restaurant would have been better off putting the more expensive beer through a tap that worked, and making apologies for not having one of the cheaper beers available.
Even if that was not possible, the waitress should have been advised not to recommend the cheaper beers that are available on tap, but rather to recommend a similarly (or more expensive) priced bottled beer.
As a Pricing consultant (yes, this is a true story and not a yarn), I often see businesses of all sizes making mistakes like this that lower revenue, when it doesn’t need to happen.
There are two major mistakes made here that have lowered the restaurant’s taking for the day. You now have no excuse for making the same mistakes yourself.
Firstly, always try to sell your premium priced products or services. If you can’t close a sale with a premium priced product, there’s still a chance you can close the sale with a cheaper product. If you’ve started to close a sale with a cheap product, and you’re unsuccessful, chances are you won’t make a sale at all.
Secondly, Pricing is holistic and touches every part of a business. That includes the frontline sales force, who should be kept informed of product availability, and encouraged to upsell rather than letting customers trade down.
Jon Manning is Principal Consultant at Sans Prix Pty Ltd, and the Founder and Managing Director of the worlds first and only online pricing advisory service PricingProphets.com, where companies can ask a panel of global pricing experts and thought-leaders what price they should charge for a product or service and why. Follow on Twitter and YouTube.