Question

In this chapter you learned that one function of price is to help allocate scarce resources. The inevitable result is that the prices charged for some goods and services are greater than some buyers are willing, or able, to pay. How would you respond to a customer who maintains that he would very much like to buy your product or service but that it is simply “too expensive”? Why do you think the challenge of explaining pricing is so difficult for some hospitality professionals? Do you believe a thorough understanding of the real value inherent in your product or service would help you handle a situation such as this? Would a lack of knowledge about your product or service tend to impair your effort?

Answer 1

The consumer determines the price of a product according to the perceived value of the product and the value it creates for him /her.For the customer who says the product is too expensive, the rationale behind high price should be related to the cost incurred in production or procurement of goods / service and the perceived benefits that can be derived from the purchase of the product. The second one is more important than the first, because in order to prompt them to pay a higher price, they must be convinced of the benefits of the product and the tradeoffs or losses they might be incurring / would incur i they don't purchase it. They should be convinced that the higher price that they would pay would be much lesser than the price they would pay in some way or the other if they don't purchase it.

The hospitality services are intangible and it is very difficult to compare one set of service to the other and assign them monetary values. For example, a face massage that costs $50 would be very difficult to tell from the one that costs $100. It would be relatively easier to do so if the provider and customer has thorough knowledge of the product used / service rendered. Continuing with the same example, if a customer knows the origin of the oil and herbal extract being used and its health benefits for the user , he /she would show higher acceptance of the high price of service after realising its worth.

On the other way, if the masseuse shows her inability to tell an unaware customer, anything about the product or the process , the service would be seen as pretty ordinary stuff by the unaware customer, even if it is of very good quality and has greater health benefits, and he /she is more likely to give it a pass.