Loss Leaders – The Musical
Hello from sunny southern NSW.
I come from an industry (restaurants, hotels and tourism-related enterprises) that has the annoying practice of picking your pocket as you eat or stay and I was a guilty as anyone else.
I thought if I had a perceived low entry price, say the main course comes in under $20.00 then once I get them (the punters) through the door I can up sell on potatoes, vegetables, salads, breads, sauces, sorbets, oil and 20 year old Balsamic vinegar.
I thought this will make me rich.
It didn’t, not for me, nor has it for anyone who tried it.
The punters became rightfully suspicious of exactly what a real meal would end up costing and found “up selling at the table” annoying. It ruined the relaxed, exclusive atmosphere I was aiming to create in the establishment. I was only getting away with it because everyone did it.
My staff also hated the whole interaction and resisted joining in with my plan to become mega-rich from my little loss leader scam.
As Master of the House of a very upmarket boutique hotel, my rude awakening happened in an unusual training experience.
It was a revelation to me that night after night everyone found our pricing strategy so see-through. Even those who had not seen the musical of my/our business plan knew what I was up to.
The board of our company met and we stopped it. We started inclusive packaging with lots of inclusions that had high value in the minds of our customers and this time we made a mint.
In a very short time everyone else in the area also changed their “tricky” pricing strategies as well. Our way became the industry standard. Bit of a pity really as this reduced the competitive advantage our frank and inclusive prices had given us, though it was really good news for you and me as restaurant customers
Action: review your offerings and prices, checking for self delusion and tricks.
That done, commence singing again and have a great weekend.
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