A Horrible Pricing Story

Here is a reader story about horrible pricing. Unfortunately this is far too common.

I thought you might appreciate my recent foray into a pricing battle with my horse boarding facility.  

A lady lives on and owns a gorgeous horse farm. She agreed to let me board my horses for $250 month per horse. The barn is basic, not fancy and with no other amenities other than a sand arena, so that was a fair price.  

After 3 weeks of boarding there, she decided to increase the price to $350 to cover the cost of her new fences. I explained that I was willing to pay $300, more than her competitors charged, even though I had a longer commute. She didn’t budge. 

So now she has lost myself with 2 horses and another boarder who has 3 horses. She’s down to boarding one horse. She could not see that her feeling that her property was superior did not create a value proposition for me. I kept thinking about our class and how the value did not equate to the price.

My comments:

There are tons of lessons here:

  1. Price increases are very hard. Don’t increase prices on brand new customers.
  2. Costs have nothing to do with price. The fact that the owner spent money to build new fences is irrelevant. If the fences added value to the renters, that might matter, but not the costs to build the fences.
  3. The reader got a great deal originally. She signed a deal for $250 per month, even though she was willing to pay $300. That is called consumer surplus.
  4. You must understand value from your buyers’ perspective. Obviously, losing 5 horses demonstrates that the owner didn’t understand the value she offered, especially relative to the competition.
  5. People and businesses often don’t understand their own value. Some overvalue their products; most undervalue their products.

What other lessons do you see here?

Mark Stiving

Mark Stiving

Mark Stiving is an instructor at Pragmatic Institute with more than 20 years of experience in business startup, development, management, turnaround and sales and design engineering. He has helped companies create and implement new pricing strategies to capture more from the value they create, and has consulted with Cisco, Procter & Gamble, Grimes Aerospace, Rogers Corporation and many small businesses and entrepreneurial ventures. He has led pricing initiatives as director of pricing at Maxim Integrated and as a member of technical staff at National Semiconductor. Mark also has served as president of both Home Director Inc. and Destiny Networks Inc. and as an assistant professor of marketing at The Ohio State University. Mark also is the author of “Impact Pricing: Your Blueprint to Driving Profits” (Entrepreneur Press, 2011). He can be reached at mstiving@pragmaticmarketing.com.

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