|No Tall Tale: Pricing Power by Storytelling.|
By Vijay Dandapani ~ Hotelier's outlook on NYC, travel and the industry
Thursday, 15th August 2013
The Harvard Business Review's blog has a post on how to raise prices (in any industry) by telling a story; a closer look at the facts on the ground reveal it to be anything but a tall tale.
The post notes that the traditional pricing model is arrived at via one of four routes. "Bottom up: calculate the cost of everything that goes into making the product, and add a fair margin on top. Sideways in: analyze and adopt the price of competitors' products.
Top down: target a demographic or economic segment, and engineer the product to meet that price. Or dynamic: use a complex, real-time calculation to gauge supply and demand, usually with the help of an algorithm."
The blog post author notes that there is a rarely used alternative to the four; one that pays off in spades. It calls for telling a story that "gives your customers' lives richer meaning. In a world of abundance, what your product does for your customers is important, but not nearly as important as what your product means to them."
No one has proven himself/herself more adept at telling a story than Richard Branson. His Virgin group, starting with a name that was considered risque by traditional media when first launched, seems to have a never ending bag of tricks.
The latest from his repertoire calls for comedians on flights and that is apparently, no joke. Virgin's domestic carrierl launced earlier this year, plans to have musicians and comedians offering live shows on flights from London to Edinburgh or Manchester. Called Little Red LIVE, the lineup will feature comedy in August and acoustic music in September.
Presumably, the added levity will lighten passengers' wallets with Sir Branson having the last laugh on low-cost rivals like Ryanair. The latter's pricing model appears to follow none of the above and basically extracts money from consumers via a variety of inflexible rules.
Hotels generally end up going down the fourth path but more than a few are trying out the story telling route if only implicitly. Hotel Chatter, writes somewhat tongue-in-cheek, about IHG's just launched Even hotels that they have been "starving for more info on the brand till they finally (recently) got a nibble".
The first two new hotels plan on catering to a holistic wellness experience and are to be situated near major conurbations, New York (Norwalk, CT) and Washington DC (Rockville MD). Even is centered on the notion that many road warriors want to but fail to eat well and work out while traveling the hotels will offer a menu of exercise options from fitness equipment to yoga mats in-room.
IHG does run the risk of losing the plot while telling the story though as much extant research on business travelers points to the key issues affecting their stay as free WiFI and a comfortable bed besides space in the room.
Further, a not insignifcant number of road warriors are not that well disposed towards a work out and could view their enforced cohabitation with equipment as an unnecessary intrusion on their space.
Vijay is Chief Operating Officer and part-founder of Apple Core Hotels- a chain of 5 midtown Manhattan hotels offering value and comfort in the heart of the city. Member of the board of Directors - Hotel Association of New York.
Read Vijay's blog HERE