Here is a fun pricing situation shared with us from a colleague.
I do CrossFit for exercise and often drop in to CrossFit gyms (boxes they are called) when I travel. It’s a common practice in the CF community. Some boxes charge $0 for drop ins (but expect you to buy something like a logo t-shirt). Some charge something, up to $30. It’s understandable they would charge something to cover their costs.
The box I go to when in Boston is in the building next to the building where I work. It was recently bought out by a large operation and they have instituted a new drop in fee schedule. If you drop in it’s $30/visit. But if you get a t-shirt it’s $25/visit. Wait. Normally you pay extra for a t-shirt. I spoke to the GM and he explained they are trying to build a following and get the word out. So they decided to give the t-shirt away and charge less. It’s a no-brainer. I have two new t-shirts. LOL.
Thanks D for the description of this unusual pricing situation. These details give us an opportunity to talk about two pricing lessons.
First, although costs don’t drive pricing, many of us have that so ingrained in our heads we can’t let go of it. D wrote “It’s understandable they would charge something to cover their costs.” I would say, “It’s understandable that they would charge something because their clients are willing to pay for the service.” I’m not an expert on their business, but it seems unlikely that their incremental costs to serve one visitor is anywhere near $30.
Second, we have a rule at Pragmatic Marketing in the Price course, “Always START with Value Based Pricing.” Meaning, figure out what your market is willing to pay, but then for strategic reasons you may want to alter it. This GM has put together a strategy, and clearly articulated that strategy to D, that says they are willing to charge lower prices to gain exposure with the intent of growing their business. This is a fine strategy.
One thing good about their implementation is they aren’t lowering price. In fact, they have set a high price to establish the value of their service, which will impact buyers future expectations of what they will need to pay. Yet at the same time offered a special deal that will hopefully bring in more trial. I wonder if they advertise this special in the community (which would make sense) or if they are relying on people wearing t-shirts to build their clientele.
D, thanks for sharing the story and keep buying t-shirts. These pricing stories are fun to read and analyze for me and the readers.