Pricing for Success


It’s funny what you come across when you have a bit of a tidy up. I was rummaging through some old papers the other day and came across a video that was given to me a number of years ago by AVN. The video was a story about dogs (it was not that type of video). It was in fact a video about Triple A dog kennels and their journey from a very old, run down kennels in the North East into a five star boarding home for dogs. The owners transformed the business by looking at their pricing and decided to menu price their services.

Triple A did this after years of reducing their prices to compete with the competition. Eventually they realised no new customers were coming through the door and they were continuing to lose money. So what did they do to turn the business round?

They did what no one else was doing; they raised their prices. The current business model was not working, which lead to the Triple A team taking a serious look at their service offerings, and after a brainstorming session, they put together a 3, 4 and 5 star service. These services included a direct video link to the kennels, grooming service and even a choice of beds for the dogs. The team was very clever with the menu price and made sure the 4 star service, which included most of their existing offerings, was higher as they thought most customers would go for this ‘middle’ pricing option.

Once the model was in place, the team was able to estimate (using some clever software) what the impact would be on the business and how many clients they would lose due to the changes. The results were quite staggering; the majority of customers went for the 5 star menu price, a considerable amount more than they expected, and they only lost 5% of their customers rather than the 10% they predicted.

With the help of software like CrunchBoards and having real time up-to-date financial information, a business like Triple A can now very quickly perform ‘what if’ analysis; flexing the numbers to see what the impact would be on their cash flow if they increased their prices further or if they employed more staff.

What I love about using real time financial information is that you can set up alerts that can warn clients if the bank account drops or is likely to drop in the near future below a certain level, or if certain expenses are exceeding budgets. CrunchBoards has enabled me to now give clients proactive advice on how the business is performing right now and in the future, rather than historically.

Businesses like Triple A show you the importance of occasionally stepping back from your business and actually looking at whether what you are doing is working. There are so many great pieces of software now too that can help businesses to review their planning models that there really are no excuses for complacency.

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