By Craig Kitch
The question often asked after paying a premium price for a service or product is: “Was it Worth It?” We often associate that question with luxury products: Morton’s of Chicago, Ritz Carlton, Mercedes and the like. But the question does not stop there.
It may not be verbalized for lower priced options, but subconsciously you are still asking the question. That is why Chic Fil A has the longest lines in town while still charging a premium over other fast food restaurants. The quality of the product combined with the impeccable service creates a value proposition that squashes the competition. “My Pleasure”. By the way, did you know that Chic Fil A brings in more revenue per store than any other fast-food chain in the nation? And, they are only open six days a week.
The trap businesses fall into is to be continually looking to maximize revenue and control expenses. Both are worthy goals. Unfortunately, those are only two legs of a three – legged stool. That third leg is improving the value proposition.
I know of a famous restaurant near where I live in Nashville, TN. It was a hot spot for the locals and a draw for tourists for three generations of the family that owned it. Then one day, the fourth generation decided to sell out to a corporate entity. The rest is, well, history.
Step one in the new corporate world was to slash costs and raise prices; it has worked so far. But one thing is missing in the mix now; the local patrons. They moved on to other options, bemoaning the lower quality and over-priced food at the comfy old hang out. The tourist market is still there because of great advertising, but those are not repeat customers. They visit once and that’s the last you will see of them. Oh, and God help 'em when the tourism industry takes a hit.
It is okay (and often good) to raise prices and maximize revenue. Just remember to maximize value as well. You can get away with things in today’s strong economy that will come back to bite you in the inevitable downturn.
Source: Craig’s Blog