Within the service sector, businesses often fall in to the trap of discounting to encourage mass participation. This is an approach easily identifiable with the old adage “bums on seats” reflected in budget airlines. When there are empty spaces, discounts and cheap prices will encourage consumers to pay at a last minute rate. This approach may be applicable to a dive center if there was 1 space left on the boat, which was then offered to a regular customer at a vastly discounted rate because the boat was going anyway. However, in many instances, dive centers fail to recognise the last minute opportunity and favour a reduced price in the first instance to get consumers through the door.
If you sell something at a cheaper price, you will inevitably deliver a poorer service. Human psychology comes in to play as you tell yourself, “Well, they’ve only paid a fraction of what it should cost, so why should I go the extra mile?” Certainly a cheaper price may get 10 new divers through the door, but if they’re met with a substandard service, they will be less likely to repeat business with you. In addition to this, these new divers will expect these low prices for the duration of their consumer life-cycle with you.
Now, you will receive the money from these 10 clients. Perhaps it’s enough to celebrate at the time, but when factoring in your overheads and time, was it worthwhile? Especially if they don’t come back. Thus leaving you in the position of having to again find more new clients at perhaps even further discounted rates. Ask yourself if this is a sustainable approach, or whether a pricing strategy that focuses on 5 new divers paying a premium price, with the intention of spending more on a regular basis is a much more profitable way of running your dive center.
Cost • Value • Psychology
Cost-based and value-based pricing are the two main methods to decide on what your product or service is worth
To use the cost-based pricing method you need to determine your break-even points that establish minimums for your price. The alternative method, and one that is often underutilized in the dive industry, is value-based pricing. This is based on the value your goods and services bring to your customers. A key concern is how high can you go before your product or service is priced out of the market?PADI Course Calculator
Use PADI’s brand goals to emphasise the value. You’re not just training divers, you’re educating ambassadors for our water planet.
To understand your customer's perception of the value of your product or service, you need to look at more subjective criteria. These are: • Your customer preferences • The features, benefits and quality of your product or service • Your company image • Alternative products offered by the competition To compete, you must make sure that your product or service meets the customer’s needs and with this information you can understand the maximum price that a customer will pay for benefit received.
Blogging and Vlogging. Website speed and mobile friendliness
Penetration. Used by businesses to attract customers to a new product or service, with the intention of luring customers away from competitors.
Skimming. A strategy that initially charges the highest initial price that customers will pay. As the demand of the first customer is satisfied, the price is lowered to attract a more price-sensitive segment.
Competition. Setting your price based on what your competitors are charging. This strategy focuses more on product than service. Your service is the extra added value that enables you to move away from this pricing method.PADI Business Academy
Human psychology is a wonderful thing when exploring pricing strategies.
Anchor. When a consumer is presented with an offer, a key element in the decision to accept or reject the offer, is whether it appears to be a “fair deal” or not. Buying pain – the activation of our brain’s pain center when paying for a purchase – increases when the price seems too high. But how does that value equation work? The answer is anchoring – typically, we store an anchor price for different products that we then use to judge relative value. In the following example, a diver is presented with two prices. The consumer may consider the monthly package of £30 a fair offer. Whereas in comparison judge the annual exclusive fee to be just too high for one payment, despite the £20 saving and extra services. The anchor is now set at £30 per month. Example:
|Monthly||1 dive from boat each month||£30 per month|
|Annual Standard||12 dives, 1 a month, plus free gas fills and equipment service||£340 annual fee|
Adding a third option and renaming the package will cause irrational buying logic. The anchor, as we now know, is set at £30. The consumer is willing to spend £360 over the course of a year with the monthly plan. Despite the saving they could make with the Annual Standard, the Annual Exclusive is now the fair deal.
|Monthly||1 dive from boat each month||£30 per month|
|Annual Standard||12 dives, 1 a month||£340 annual fee|
|Annual Exclusive||12 dives, 1 a month, plus free gas fills and equipment service||£360 annual fee|
Goldilocks: Too hot; too cold; just right. If your dive center offers three similar products with slightly varying prices, your consumer will identify with one of them. Take the PADI Open Water Diver Course with the PADI Dry Suit Specialty.
|Low - Open Water Diver Course||£435|
|Middle - Open Water Diver Course (inc. Drysuit Specialty)||£535|
|High - Open Water Diver Course (inc. Drysuit Specialty and 2 fun dives)||£599|
The consumer will evaluate all three options and make a decision based on their requirements.
A consumers decision making process is determined by their perception of your product and pricing.
Optional. Increase the amount of customer spend once they start to buy. Optional extras increase overall price. Your price for a PADI Open Water Diver Course is £435. Once your new diver has paid and booked on to the course, encourage further spending by emphasising the need to own their own mask, fins and snorkel, rather than use the shop rental equipment.
Premium. Keeping prices artificially high in order to encourage favourable perception among your consumers. In this example, the PADI Open Water Diver Course has risen from £435 to £600 to reflect the high level of service you offer. Group sizes are small, pool hire is included as well as all equipment hire. Transport to and from dive sites will be organized by the dive center and parking costs are covered. A premium price reflects the premium service.
Bundling. The PADI Open Water Diver course price is set at £435. The PADI Advanced Open Water Diver course is set at £315. If individually bought your consumer pays £750. However, by bundling courses together, you can sell an attractive package. For example; “get your PADI Open Water Diver and Advanced Open Water Diver course for £695”, saving the consumer £55.
Context. Your prices vary depending on circumstances. In this instance, a potential new diver wants to get their PADI Open Water Diver certification. You’re about to run a course for 3 other students who booked earlier in the month. At this point you’re essentially now just filling a space as the course is going ahead with or without the potential new student. To encourage the sale, let the student know it’s the last place on the course, thus setting the context. Selling the course for £420 instead of £435 could build a relationship with the consumer for future spend.PADI Business Academy
Don't undersell the value of diving. You're training the next generation of ocean ambassadors, conservationists and more.
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