The little number really stood out on the accounts of one of the railways I work with.
The average fare per passenger had risen dramatically over the past 12 months.
On the face of things, it made no sense.
We’ve carried a relatively small number of passengers since COVID. For obvious reasons, demand has dropped.
And over the years, passengers have been fairly consistent in what they were willing to pay for a train seat.
So why the change?
The answer is that because of COVID, we stopped selling single seats. Instead, we’ve been selling entire compartments.
It’s far more expensive. But turns out, there are plenty of people willing to pay for them.
An entire compartment gives families the security of social distancing. They get to travel in comfort. And it’s a really fun experience!
COVID has changed the way many businesses are able to charge.
Just the other day, our Associate Director Shirley Hoy told me that some of the houses in Cornwall, near her aunt, were being rented out for £4,000 a week – that’s four times what the owners were able to charge pre-pandemic.
Then there’s my dentist, who added a £5 “COVID charge” to my bill. Like most people, I paid it without complaint.
Both those businesses can raise their prices because they’re experiencing additional demand… And because what the market will bear has changed.
But even if you think that doesn’t apply to you, you should take this opportunity to look again at your prices – for two reasons.
First, because you should look at your pricing strategy every 6 months anyway.
It’s just smart business to continually evaluate whether you could charge more. Markets change, your customers’ priorities change, your own outgoings change…
If you want to stay profitable, continually managing your pricing is a key part of the equation.
COVID has super-charged (ahem) this process. Across the board, people’s mentalities, financial capabilities, values and desires have changed dramatically. It’s worth looking again at what they’re willing to pay for your product or service.
The key is, don’t make any assumptions! It’s very easy to get entrenched beliefs about what people are willing to pay, but that doesn’t mean you’re right…
…Or that the three stingy customers who complained you were charging too much were right, either. As my train example shows, there may be plenty of other customers out there who are willing to pay more for a superior product or service.
This isn’t about taking advantage of people, but about making sure you’re charging what you’re worth and making sure you’re not being left behind as the market changes.
So test different pricing strategies, look at what your competitors are charging and keep an open mind. You might be surprised.
Plus, even if your sector has been relatively insulated from the impact of COVID, your expenses might be higher than they were in May 2020. If your spending changes, you’ll need to reflect this in your pricing to maintain your margins.
This is something we can help you get right.
Our Outsourced Finance Department service is all about giving you excellent financial management, so you can maximise your profitability. You can’t do that if you’re charging the wrong price – which is why looking at pricing is a core part of our service.
To find out more about how we can help you, send us an email or call us on 01279 647 447 today.
Warmly,
Garry
