The way your couples look at pricing is very important. In mature industries such as the wedding one, it is becoming very difficult to differentiate between vendors. As such, regardless if you are a wedding photographer, DJ, officiant, planner or limousine company, you are often forced into a pricing war.
Show us a mature industry and we will find you a price war! Retailers, telecom and financial companies and airlines know how dangerous a price war can be. Pricing wars damage not only the present margins, but also future earnings and erode brand perceptions and value.
The typical scenario is this: one day, a company sets a very bold growth target and someone has the idea to cut prices. We all know that in an ideal scenario, lower prices mean increased consumption.
Sadly, that is not always the case. According to several wedding photographers interviewed, they cut prices and ended up photographing the same number of weddings, just at a lower price.
Price Cuts Often Don't Increase Consumption
Many customers don't monitor the prices in the same way business owners do. As such, a bride might not even notice a price cut unless it is advertised properly. Even worse, couples react to the words "sale", "promotion", "limited time offer" even without a price cut.
Often, your competition will match prices, making price cuts useless. Such a price reduction hurts everybody. High end vendors are squeezed and forced to offer subpar products and services so the quality suffers. Brides who had the budget to buy top products now gravitate towards cheaper options.
Deep Wounds That Last
Sadly, cutting prices in the wedding industry does not necessarily increase demand. What will invariably happen is a marginal increase in the number of transactions (couples who purchase your services) while your profit margins drop significantly.
We had a chat with Calin, a Toronto wedding photographer (of bycalin.com) and he shared his story. One year he noticed business was slow so he decided to launch some promos. A 15% off to be more specific. Sadly, there was no increase in the number of clients that booked photography services and the profit margin was significantly lower. When all was said and done, the net result of the promotion was a drop of 20% in revenue that year. Why?
Many couples who booked at full price asked for refunds. Also, most brides book photography services about one year in advance so the damage was long term. When our wedding photographer tried to raise prices, he lost all referrals from the previous year. For the brides, the low price became the benchmark and it was almost impossible to change their reference prices. It took a few years and a lot of work to recover from the damage.
While it is very easy to drop prices, the damage is often irreversible or takes a lot of time and effort to fix.
Better Pricing Equals Higher Profits
A survey done by McKinsey showed that all things being equal, a 1% increase in pricing drove a 11% profit increase. Imagine you are able to increase prices by 5% every year!
Providing sales training to your front line could make the difference between running a decent business and a great one.
Provide Value and Don't Focus on Prices
Most business owners we interviewed talked about price. There seems to be an obsession to match or beat our competitors' prices. That is a wrong approach.
A winning pricing strategy is to find the "pain points" of soon to be married couples and provide excellent value for a fair price.
Go ahead and tell your brides why your services or products are better, how you will ensure their big day will be flawless and what they lose if they hire your competitors.
Fear Uncertainty Doubt
There will always be a cheaper and you need to own your prices. Do you know why you are worth your price? You offer a faster turnaround time, higher quality, better service, etc. Consider adopting a value pricing model.
Often there is a solid reason why your competitors' prices are lower: maybe they are having financial difficulties (will they even be in business next year?), or the quality is lacking, maybe their service is subpar. Let the brides know the facts so that they can make an informed decision.
By presenting the facts you will create fear, uncertainty, doubt when it comes to the competitors' services.
Still, ff your services and products are identical to your competitors' and your prices are higher, you will have a hard time growing your business, unless you are a marketing genius and your branding skills are outstanding.
Choices Increase Profits
The best way to create value for the clients and increase profits is to offer a multi tier product approach. We are firm believers in the Good-Better-Best approach.
Pricing is often a neglected aspect of the business and that impacts negatively the bottom line. Make sure you invest your time and energy in developing a sound pricing model that creates value for your couples.