Pricing basics
This Pricing basics Info Guide gives you practical information about how to set your prices to improve your profits.
When setting prices, you need to balance the needs of your customer with your profit requirements. To set the right prices, you need to know your:
Product
Target customers
Competitors
Costs
Timing also plays a key role in pricing.
The price that you charge depends on the type of product offered. Your customers are seeking a memorable stay. You need to constantly reinvent your product offering, eg, by making tweaks to appeal to your preferred target market to encourage repeat visits. If you deliver a high-quality product which is tailored for your target audience you can charge more than if you are focused on value for money.
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To successfullly provide customers with the product and service they want, you need to know:
- who your customers are.
- what price they are willing to pay.
- what experience they expect in return for the price charged.
You can then set more competitive prices.
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To provide a satisfactory customer experience, consider the folllowing:
What will make my Guesthouse or B&B more appealing to my target customers?
What barriers might prevent potential customers from staying at my Guesthouse or B&B?
Businesses benefit from finding ways to collaborate with other businesses in their locality to build the overall number of customers to the area. Work with other businesses to create packages and special offers, refer customers to local tourism operators and collaborate on joint marketing. Sample packages include:
- Accommodation plus an activity such as a guided walk or cycle, an adventure activity, a trek on horseback, a round of golf or a boat trip.
- Accommodation plus a lesson/series of lessons, eg cookery, painting, music, crafts, dance, theatre or language.
- Accommodation plus an attraction or entertainment such as a park admission, entry to a local festival, or to see a show, exhibition or talk.
For example, if your Guesthouse or B&B is located in an isolated rural area with poor infrastructure, people may be discouraged from renting it. To overcome this barrier, provide a free pick-up and drop-off service.
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Remember!
Competition influences the maximum price for which a product or service can be sold.
Differentiate
Establish within your target customers a perception about your Guesthouse or B&B that will differentiate it from that of your competitors. In order to stand out from competitors you need to market your point of difference, eg, scenic location or proximity to language school or sources of entertainment.
Competitive advantage
Any advantage that you have over your competitors will help to make your Guesthuse or B&B more appealing than those of your competitors. Your competitive advantage may be a unique superior service that only you can offer, eg bicycle facilities, storage space for equipment or gear used for activities. You can also gain competitive advantage if extra value is included in the price you charge.
Identify the benefits you offer
Identity the unique benefits of your Guesthouse or B&B business, together with the level of service or standards you provide, and communicate this information to your target customers.
Work together
Visit other Guesthouses and B&Bs and find out how customers respond to the kind of customer experience that you are trying to create. Build networks with other businesses that you might view as competitors.
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Estimate all the costs involved in providing your accommodation, including running costs, in order to ensure that your pricing makes a profit.
For more help with costs and profits see:
Cost control
Profit basics
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Seasonal business
If your business is seasonal you may be able to charge a higher premium in summer than during winter.
Perishables
Perishable food has no value after its sell-by-date. Offer special deals to customers to sell food that may spoil if unsold.
Evening meals
Do you cater for the lunch trade or evening meals? Generally you can charge more for the same meal in the evening.
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Consider these key points when deciding what price to charge:
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