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Raising prices, managing expectations & profitability

Raising prices, managing expectations & profitability

If handled well, rising prices allow hospitality businesses to better serve their customers, whilst focusing fully on customer service.

A small marginal increase in prices, will mean that in order to have the same level of takings, or income, you do not need to serve as many customers, and therefore are likely to be able to provide an even higher level of customer service to every new patron through your doors.

Many hospitality business owners or managers are worried or fearful about raising prices, for fear of losing trade however this is an inevitable part of life on an annual basis, and if handled well, will actually allow you to provide a higher level of customer service and a better customer experience in the long run.

Considerations when increasing prices, is the matter managing expectations of existing customers, as unexplained, or unexpected price rises can cause uncertainty and make people feel unsettled.

On the whole, customers are not unreasonable regarding a businesses necessity to operate profitably, and when well handled, this can actually sometimes increase patronage and customer base, rather than reduce it.

If we take the example of £1000, and a sale price of £10, we need to sell to 100 people in order to achieve this level of income.

However, increase the sales price by just 10%, we now only need to serve 91 customers to achieve the same income.

Obviously this margin increases considerably when scaling across larger businesses, and income scales. However in this example, serving at nine less people in every 100 would mean you could spend 9% more time tending to their needs.

Ultimately the more you can create an outstanding customer service experience, the more likely your business is to grow through referrals and recommendations, or even online reviews.

In fact rarely do people comment on or discuss a good experience in hospitality, however most people will, as the word suggests, remark on a ‘remarkable’ experience!

If you want to raise the profile of your hospitality business, to encourage people to talk about you, or to receive more recommendations and referrals, I can’t stress highly enough the importance of focusing on creating an outstanding and remarkable customer journey and experience!

Obviously there is a limit, and it is all about balance when looking to increase prices, but helping existing customers to understand this is key to the success of any price rise.

Imagine as per the example substantially improving the experience of 91 people, rather than serving 100, simply because you had more time, and we are less overstretched in your business.

A simple price rise example like this, highlights of balancing your pricing, and any price increases with investment in the business and customer experience & service you provide.

I am curious when you last reviewed your pricing, or even considered making a change to it? After all we are in business to serve our customers and make a profit, which we can only do with continual review and analysis.

One way to handle price increases for existing customers, maybe introducing a staggered price increase for existing customers, or possibly around a period at the original price for anyone who has already shown loyalty.

Doing something like this will highlight to the customer the importance of looking after them, and that it is not simply about money in the bank, but about continually improving what you are able to offer them.

Obviously there is a limit, but on the whole, customers are prepared to pay a little more for a substantially better service or product, so consider this when next looking at your bottom line and profitability.

The maths is pretty simple, and hopefully after reading this blog it has given you some food for thought on one way you can improve your custom experience, create a better customer journey, improve the reputation of your business premises, ultimately become much more profitable without anything outrageous needing to happen within the business, and small continual improvements.

Unsure how to implement this, or how to structure this within your hospitality business, I am more than happy to share more specifically for your business. Please feel free to get in touch, and look forward to hearing from you soon.

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