When setting a price for your service, what factors do you take into account? How does the user perceive this price? What expectations do you generate in the customer's mind? How does this affect your perception of quality?
The price on a service means a lot to the customer. Sometimes it means more than other factors that can describe a service you don't know about. Let's think of a tourist looking for accommodation online. Enter the web pages of different hotels and see the photos and the services they offer. We know well that sometimes a web page, a photo, does not describe reality as it is. But instead, when you have the rates for the different options, you complete your mind map of service expectations. Even more so if you are a regular tourist of a certain type of hotel.
These days I was reading a comment from a customer dissatisfied with a restaurant, which said: “where the price of a dish is between 150 and 200 pesos, they serve me on plastic tableware. I mean, for the price you already expect something nice to look at. "
This example clearly paints us the reality that I am trying to describe. There is a theory called Useful Value that relates the price of the product with what the customer is willing to pay for it due to the perceived (or expected) quality of the service. In other words, a customer, by knowing a service or by generating an expectation of it, will figure a value in his mind. If the actual price of the product is higher than that value, the product will be “expensive” to you. On the other hand, if it is less, it will be "cheap". Going to the previous example of the restaurant, this client for the service in plastic tableware has figured a value lower than 150 pesos. For this reason, the real price (between 150 and 200 pesos) is excessive.
But let's look at the problem in reverse. If the customer does not know the service, but sees the price, they will expect a quality of service according to that price. This is the expectation generated by the price. If we look at people who walk through a city looking for a restaurant, they first look at the place, if they like it they go to the menu that many put on the door and read the menu and prices. If they agree with what they are looking for, enter. Now, these customers have information that allows them to get an idea of what they will receive, according to the price of the dishes they saw at the door. For example, for a plate of ravioli of 50 pesos they will not expect the same as for one of 80. Those 30 pesos have to be somewhere: on the table linen, on the dishes, in the space between the tables, in the decoration,in the number of waiters per table, in the quality of the ingredients… if those 30 pesos do not appear, then the customers leave unsatisfied.
Therefore, you have to be aware that your prices generate expectations in customers, which you must then satisfy with quality of service.
I propose then to do the following exercise to evaluate how you are in this regard. This should be repeated with some frequency (at least annually), and it will give you a measure of the expectations that your prices generate. It consists of the following:
1. Define the two main groups of customers of your company. Do it thinking about what other experiences of your same service they have. For example, if you are a hostel, your main group may be European tourists aged 25 to 35, and the second group, national tourists who love extreme sports.
2. Identify the other housing experiences these groups have. Eg: other hostels in Latin America, campsites in wild areas, etc.
3. Look for information on prices and services of those other companies. If you can know and experience them personally, so much the better.
4. Sort the list of companies (including yours) from highest to lowest by price. Find a price that is representative and comparable for your business. For example: standard double room, or barbecue for two people, etc.
5. Looking at your location on the list, refer to competing companies above and below yours, and note the differences in service with each. Then evaluate if the price differences are consistent with the service.
6. Make the adjustments that you consider appropriate: correct the price or modify the service.
Remember that the objective is that the price generates an expectation in your clients such that, when experiencing the service, it fully satisfies them.
