In one of the very first issues of this marketing column, we talked about the Four Marketing Ps: Product, Promotion, Place and Price. Although Promotion has been given the most ink, we have touched base on each of the subjects. A recent experience (you know I love a story!) with a close friend in the restaurant business reminded me to revisit the Price topic. Here’s how it went:
My friend is a successful businessman with restaurants and attractions in tourism-rich Myrtle Beach. Although he’s done well, group business was never part of the mix. That is until he bought, remodeled and opened a 400-seat seafood buffet restaurant. Then the call came: “You know about buses, right?” He suggested we meet for lunch.
Unable to say no to a friend (and besides I was hungry), I agreed to lunch. Basically, we talked about some of the same things I’ve shared with you over the past two years.
His business enjoys great visibility on a major highway. Prominent street presence has the Place part of the mix in good shape. There was no doubt in my mind that the Product would be superior. He’s coaxed out of retirement a well-respected executive chef with his own history of outstanding buffet restaurants. I’m comfortable with the Promotion material properly positioning his business. He has a good designer and they both understand the need for a consistent message.
Finally, we moved to the Price discussion and the need for tiered pricing. Gee, and I thought lunch was going so well! I was met with the comment, “Why do I need this tiered pricing? I have a group rate.” Of course, the explanation is simple.
Everybody is entitled to make money helping you market your business. A local receptive operator deserves your best price based on volume. A professional tour operator may bring a series of tours to the destination and again is promoting your restaurant. Finally, a group that may only be visiting every few years also deserves a price break. Suppliers selling to receptives selling to professional tour operators selling to group leaders each need to make money. It’s their business.
“Perfectly understandable,” he replied. “Why don’t I just give that best price to everyone and let him or her make their money?” In terms that any good businessman would understand, I explained you don’t want to leave money on the table. That he understood.
The more difficult pricing issue most group-friendly businesses face is committing to a rate that’s 12 to 18 months away. It’s difficult to focus on a future number for someone more in tune with today’s price of snow crab legs than most of us are with our mutual funds.
From the supplier’s side, providing prices for future business is just something you need to do in the group business. Although we’ve teetered in a recession, look at your price increases over the past few years and make an educated guesstimate − cautiously, erring on the high side.
Buyers need to understand that their suppliers are facing the same economic conditions. Like you, it might be fuel, labor or health care costs that are going up. We just don’t know how much. Ask your suppliers to be flexible and you do the same.
Price increases will definitely affect the value tour business, as those trips are often based on price. Now might be the right time to explore some new suppliers, or even destinations that could be affordable. Moderate and deluxe tours might not be as price-sensitive, but suppliers should keep in mind those trips are not priced to absorb significant rate increases.
We could certainly bounce around for hours talking about pricing issues. However, when it comes down to the basics, it’s pretty straightforward. You need to mix the best pricing history you have available with common business sense that allows you to be profitable. Blend them together with a generous portion of flexibility.