Operations

What Does Your Price Say About You?

Posted on September 3, 2013 by - Also by this author

Plug into the industry “chattosphere” lately and you’ll pick up plenty of talk about service pricing and rates. Operators fear that the mobile app-driven troika of Uber, Sidecar and Lyft are taking prices into the pit. A question of concern: How will operators make a living delivering premium service amid such cut-rate bottom dollar semi-competitors?

There’s no doubt the pricing dynamics in the industry are shifting. We are seeing more price levels, tiers and varieties of ground transportation service than ever before. But I doubt that such pressured discounting will destroy the luxury and quality level pricing at the heart of the limousine industry. You are still dealing with different types and classes of transportation clients with varying perceptions of value.

What’s A Price?
A price, or rate, is simply a signal of what something costs at a moment in time in a free market economy. It’s a piece of information that communicates to the customer on two levels: 1) How much money you will separate with in exchange for a product or service, and 2) What that service is worth — the overall value it can potentially deliver. The first level is practical and direct; the second is more subtle and emotional. For example, notice all the instant evaluations that shoot through your mind when asked to choose one night at a Motel 6 for $49.95 versus one night at a Marriott for $195 versus one night at the Ritz-Carlton for $395.

To make my point, I’ll digress a moment to share how I recently came to an important price decision:

Hard Decision
Like many homeowners, my wife and I reached the point this past summer where we planned to replace our aging carpets and pergo floors with hardwood floors. If you are a homeowner, you are likely familiar with all the options, risks and protocols involved with finding the right contractor. There are plenty of dismal stories out there; just peruse the civil court cases and see how many are related to construction-related contract disputes. So we approached this with a mix of dread and caution, and like any customer, sought the best price. Over the course of two months, we had eight contractors come by the house to give estimates while we “Googled” wood and material costs. The approaches, appearances and price estimates of the individual contractors varied widely. Of course, there were also the wink-wink options involving non-bonded contractors who are cheap and may or may not be entirely legal. [One such contractor who we met with three times kept changing the estimate]. What we learned was that the upper tier estimates came from the established and experienced contractors — the ones who are longtime craftsmen who enjoy “creating” floors. After thinking and comparing and sometimes disagreeing, we finally gritted our teeth and settled on a contractor with a price somewhere between median and most expensive. It just felt right.

Pricing Pillars
During the two week flooring project, with our house in constant chaos, I spoke with a longtime limo operator who does his own thing and succeeds very well. He told me he charges some of the highest rates in his metro market, quoting $160 for a one-way airport transfer in a Lincoln Town Car from an outlying suburb. His company keeps growing. While he didn’t gain business during the Great Recession, he didn’t lose any either, and never cut his top-dollar rates. He makes sure he backs up his rates with the best vehicles and professional chauffeurs, many of whom have been with him 10 years or more because he pays and trains them well. Vehicles are clean and on-time. His brand communicates a classiness and confidence that comes from years of hard-earned experience and service.
So, putting two and two together: If you are good at what you do, then you signal that by stating what your service is worth. A price reflects a cost-benefit calculation as much as intangible factors that help comprise overall value. Not everyone is looking for the lowest price, and even among those who do, a subset will at some point get burned, turned off or simply want something better.

Quality Rules
In certain respects, the end result of our hardwood floors reminds me of many a chauffeured ride. I was surprised to see how smoothly our flooring project unfolded. The contractor was fixated on getting the details right. He showed up on time, always put in a full day’s work, communicated with us on every aspect and stage of the project, listened to and answered our questions, and even worked weekends to get the job done on time. He drives a modest, older-model Chevy van and forgoes any uniforms or overt marketing. He simply thrives on work and reputation. An outsider looking at the final bill might argue it was overpriced; we say the flawless product is priceless. In addition to quality wood and skilled labor, we bought peace of mind, good ethics and safety, a transformed interior look that will bring visual pleasure for many years to come, and a no-hassle experience over 13 non-stop contractor working days. We tipped the contractor and would gladly use him again.

If your chauffeured service is built on quality, integrity and passion, no little compact car with a pink moustache and a high-strung aspiring thespian behind the wheel will derail your service. Put a price on what your service is worth and stick with it. Sooner or later, cheap trendiness fades and quality endures.

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