Is your guilty secret is that you pulled prices for your wellness services out of thin air? Relax. You’re not the first wellness owner to do that. Now’s the time to sharpen your pencil and get it right, with these best practices.
Pricing Self-Assessment
Give yourself one point for every “yes/agree” answer. See the scoring guide below.
Y/N 1. We base our prices on the value we provide, not on what other businesses charge.
Y/N 2. We compare our business to the right competitors.
Y/N 3. We fully understand the value of our products and services to customers’ lives.
Y/N 4. We fully understand our community pocketbook.
Y/N 5. We raise prices periodically.
Y/N 6. We always understand our actual costs before we set prices.
Y/N 7. We never base prices exclusively on our costs.
Y/N 8. We always factor in paying management when setting prices.
Y/N 9. We always factor in profit when setting prices.
Y/N 10. We compete primarily on factors other than price.
Y/N 11. We rarely discount.
Y/N 12. We understand the effect on price and revenue of our discounting strategy.
Y/N 13. We always give customers a tangible reminder of our value.
How did you do?
0 – 3 “yes/agree” answers – Immediate Business Issue
A thorough and methodical approach to setting prices will greatly improve your odds of business success. Few businesses succeed long-term if they do not follow most of these best practices.
4 – 6 “yes/agree” answers – Significant Improvement Potential
Using some of these practices is a good start. Develop a plan for focusing on each of your “no ” answers to sharply improve your profit picture.
Your business is in good company. Many successful businesses would score themselves here. Focusing on the handful of “no” answers will move your business into the top performance tier.
11 – 13 “yes/agree” answers – Top Performer
Your business is exceptionally effective at establishing prices that fully reflect the value you provide to customers.
Discussion
1. We base our prices on the value we provide, not others’ prices.
Should you take a look at what similar businesses charge?
Sure. But blindly copying their prices is foolish.
The personal trainer who charges $100/hour may have special skills, or target clients who place a very high value on their personal achievement.
If you’re just posting flyers in neighborhood apartment buildings, you’ll end up with a mish-mosh of clients.
On the other hand, if your wellness center offers exceptional programming, charge prices that fully reflect that value. You’re not competing with Curves, so you’re under pricing your services if you charge like Curves!
2. We compare our business to the right competitors.
Don’t charge Ford prices if you’re offering Lexus services. Don’t charge steakhouse prices if you’re selling a quarter-pounder.
If your weight management business targets post-surgical bariatric patients, don’t compare your prices to Weight Watchers.
If your gym focuses on sports-specific training for ambitious high-school athletes, what difference does Bally’s pricing make?
If your life-coaching practice focuses on individuals with unusual challenges, don’t compare your prices to an internet-based résumé preparation mill (real-life example).
3. We fully understand the value of our services to customers’ lives.
Value is the difference your business makes in customer lives. Price is what that difference is worth to the customer.
You’ve absolutely got to understand why your business is successful with your “home run” customers -– the ones you serve best.
Then, tailor your business to serving those customers – and only those customers. Price accordingly.
If you’re running a circuit workout mini-club in a blue-collar area, understand the pocketbooks of your clientele. Fill their need for social support in a non-intimidating environment. Give them an environment they’ll love at a realistic price.
4. We fully understand our community pocketbook.
We talked with someone recently who owns an underperforming fitness equipment store. They’re in an extremely wealthy area, which should mean strong sales.
But: they primarily carry lower-end brands. The high-school student working the counter doesn’t know much about fitness.
To be successful, they need to get a seasoned fitness professional who can offer personalized, high-touch customer service. They need someone who can discuss customer goals, then make trusted and confident recommendations. They need to drop lower-end brands and add health-club-quality lines, plus home gym design capabilities.
5. We raise prices periodically.
Do your customers feel better off now than they did a year ago, thanks to your products and services? We hope the answer is a strong “yes!”.
If you’re adding more value to their lives, consider raising prices. This is particularly applicable if you primarily provide services.
And unless your costs decreased, periodically consider cost-driven pricing adjustments as well.
Remember throughout the year that you are constantly building a case to raise prices. Collect testimonials. Really listen to what your customers tell you is great about your business. Roll that feedback into your sales and marketing messages. It’ll resonate with potential customers just like the ones you already have.
6. We understand our actual costs before we set prices.
We often see businesses set extremely low prices and get all excited because they think they’re really going to blow their competition out of the water.
Generally, however, they’ve also got unrealistically low cost estimates. For example, they often forget the costs of tradeshow travel, or renewing certifications, or sending staff to training, or periodically updating equipment and freshening paint, carpet, etc.
Then the realization that revenues are actually lower than costs triggers a cycle of absolutely essential – and sometimes large – price increases that scare off the price-sensitive customers they initially attracted.
What a waste of time, money, and sales efforts!
7. We never base prices exclusively on our costs.
Probably the most frequent pricing mistake we see.
As we’ve said before, prices are a direct reflection of the value your business adds to customers’ lives.
What value do grandparents place on having the energy to really enjoy the grandkids? What value do ambitious professionals place on looking sharp and feeling great? What value does someone with a chronic health condition place on feeling better? What value does someone who feels overworked and stressed place on a balanced life?
Start with what customers value. That’s what they’ll pay for. Then make your costs fit.
8. We always factor in paying management when setting prices.
Speaking of costs, we often talk with business owners who leave their compensation out of the equation.
Sure, we all hope that our businesses will rock-and-roll and make us gazillionaires… but in the meantime, make sure that you’re paying yourself.
If your business won’t support you, and you’re dependent on it for income, face it and make the necessary changes. And if a business can’t afford to pay the management team after it pays employees and suppliers, it’s not going to survive long-term.
9. We always factor in profit when setting prices.
Remember that the key equation is revenue minus costs equal profit. Most businesses aren’t profitable on Day 1. But if revenue never exceeds costs over the long-term, there won’t be any profit.
However, if you’ve priced your products and services right, and your costs are appropriate for your business, as you add additional volume and repeat business from loyal customers, your business will become profitable.
If not, start by looking at your prices. Did you commit any (or all!) of the pricing sins we describe here?
10. We compete primarily on factors other than price.
If your primary marketing tactic is to undercut everyone else’s prices and make it up by serving lots more customers, we think you won’t be in business for long.
Wellness is all about making a difference in people’s lives. That means being genuinely responsive to the daily challenges and issues that drain customers’ energies.
You won’t get there if you’ve got to run as many customers as possible through your cash registers every day just to make ends meet. Quality beats quantity every time.
Who outperforms Sam’s Club in terms of revenue and profit per square foot? Costco, a warehouse club known for great employees, high-quality products, and excellent, dependable customer value.
11. We rarely discount.
Listen, most wellness businesses are not operating on the same scale that Wal Mart is. Our businesses in this industry are almost always highly personal and responsive to the characteristics of the local community.
Walmart can make a business as a discounter. You probably can’t.
Your goal: don’t rely on discounting to attract customers. Instead, justify maintaining and increasing your prices by adding value. Do it right and you’re giving customers the sleeves out of your vest…offering them something that they’ll value, yet will cost your business little to nothing.
For example, use “invitation only” events to give your best customers first crack at new spa products, or a new mind/body class. Partner with other businesses which appeal to these customers. Get creative – if your clientele is mainly women, how about inviting a nearby boutique to stage a fashion show in your facility, or to provide a display of the latest accessories (for sale, of course)?
12. We understand the effect of our discounting strategy.
Many product-oriented businesses that routinely use discounting often underestimate the impact on total revenues.
If you typically clear out 15% – 25%, say, of your annual inventory through discounting, recognize that you probably overestimated the revenue you were going to see from those sales.
If you must discount (and we don’t like it!), at least be sure you really understand the bottom-line impact.
Don’t treat it like a one-time event if you’re continually marking down. And remember to include discounts in your annual budget.
13. We always give customers a tangible reminder of our value.
Customers can’t touch or see services –- personal training, yoga classes, life coaching, nutritional counseling. Unlike a product, they can’t take a service home or show it off at the office. And out of sight often means out of mind.
Give the customer something of value that they can literally see and touch.
One easy and creative idea: individual “wish jars” for wellness coaching clients to keep by the bed and drop in notes with their deepest hopes and aspirations.
Just make sure you choose something:
- with real value to your customers that
- reinforces what’s special about your business.
Just because other health clubs give away water bottles doesn’t mean yours should. Water bottles say nothing to customers about why your business is different and better (doesn’t every health club offer water to members?).
Choose something distinctive. If you coach busy professionals on managing stress, give them a custom stress management app or a distinctive playlist.
