Good PR or another bad pricing move?


If things come in three, I’m expecting another example of bad pricing policy to come my way in the next 24 hours. I just finished writing about how my shoe cobbler is leaving money on the table when along came another prime example of it.

We were out visiting last night and some friends were showing us around their $200,000 renovation project, currently under way. In the middle of the tour, my friend Harold explained how they had paid $15,000 for the design of the addition. Then he told about how his designer reduced her price by $750 after quoting on the deal, because, so she said, she had to do less drawings than she had expected.

Has this ever happened to you? After you agree to a price, the seller reduces it. Initially I thought how crazy she was, refunding $750. But then it dawned on me that this might be a brilliant move on her part. After all, she only gave up 5% of her fee, but now she has him telling his friends what an honest business person she is. Maybe she’s crazy like a fox…

I suspect that this move was not pre-meditated; his designer did legitimately over-quote, and did in fact reduce the price when she finished the job.

But as a marketer, I just can’t leave the analysis alone. I like her model for services, at least occasionally. After all, she didn’t really lose much.

What do you think? Let me know by email, or leave a comment below.

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4 responses to “Good PR or another bad pricing move?

  1. To me, this sounds like an excellent plan for stimulating word-of-mouth recommendations. And $750 once in a while is unlikely to buy very much effective ‘conventional’ marketing.

    I would imagine that repeat business in this line of work is relatively small, but that personal referrals are a major source of new clients. Doing a good job is a start for getting recommendations (and you won’t get any without it), but distinguishing yourself in some other tangible way makes you stand out. Harold’s designer has chosen an after-the-fact discount, which seems odd, except that it paints her as honest and fair. Both of these are highly desirable traits when accepting personal recommendations.

    For example, if Alice has a similar renovation project in mind, and mentions it to Frank, Geoff and Harold, she might get the following responses. Frank says he wasn’t entirely happy with his designer but Geoff says that his did a good job. Harold tells the same story that he told you. Who is Alice likely to get a quote from? Is that worth $750?

  2. Well put Michael. Upon more reflection, I like the plan too and agree with you.

    I received an email on this posting from Steve Johnson (see our blogroll) saying this:

    > I fear that the designer was thinking
    > “cost plus” and her costs were lower
    > than expected. It’d be great if she
    > did it on purpose but I suspect she’s
    > just an amateur.

    I think you’re both right. As a pricing strategy, it’s a very smart PR move, but likely this designer was just discounting based on cost rather than doing deliberate PR. Maybe I’m not giving her enough credit though and she sees all sides, being the omniscient designer marketer. Anyway if I get a design I think I’ll call her. 🙂

  3. Hi Alan,

    In the city where I live, there is a paid parking downtown. The square isn’t very large, but they have too many gates, at least a couple from each direction. The gates don’t have turnpikes and drivers go in and out through all of them. This place is sort of an industrial zone where people are typically park the car for a few minutes to go drop/pick up things or do a quick shopping. It’s difficult for the parking owner to control all exits, so what does he do? The minimum payment is per 1 hour (although most people park for 10-20 minutes). He charges you for 2 hours (!) and returns you the half if you pick up the car after 1 hour. He covers himself for the worst case, although I really don’t think that drivers use to go out without paying.

    I think that the same practice goes with your friend’s designer. She overpriced her service on purpose, because she knew that some clients are hard to satisfy, and they make her produce much more drawings then regular clients.

    This fear to lose points to her lack of experience or inability to professionally estimate the SOW (scope of work). If this is a well thought out marketing move, I’m sure it would only work in particular niches of the market.

    Julia.

    • Hi Julia,

      Interesting observation. I guess in the case you describe, the issue is more about managing internal costs than external image. Still, interesting.

      Thanks for responding!
      Alan