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The Myths of Marketing unravelled |
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Part 2 of The Myths of Marketing unravelled for the small business
by Pamela Carvell Chairman of the Hotel Marketing Association Marketing is key to any business’ success. But, that is even more relevant in this economic downturn. Previous recessions have shown that those companies that continue marketing not only survive the recession, but also come out of it much quicker. Marketing is traditionally defined as the four P’s i.e. Product, Price, Place Promotion. In the first article (see???) we covered the importance of getting the product & facilities and services that are right for your target market. This article is all about pricing and discounting. The most important function of price is as an indicator of product quality to the potential customer. This has always been the case, but it is even more important now that a global audience can see your pricing, if you have a web presence. This contrasts with the ‘old days’ when guests had to phone you to find out your prices. Seventy percent of people will look at a website before making a booking for accommodation, even if they make it by phoning you direct, and even if they have originally requested a brochure from you. Don’t underestimate the percentage of the population that has access to the web. It is even over 50% with the over-50’s! They will view your price as a guide as to what sort of standard they can expect. Pricing should always be customer-led, rather than cost-based. To establish customer-led pricing you need to research what prices are being charged by other B&B’s and budget hotels in your area. In a location where there are many B&B’s & budget hotels e.g. Leeds, customers will typically expect to pay a lower price than somewhere like the Isle of Skye, where there is a shortage of B&B’s and hotels in the summer months. This raises the issue of seasonality. You could adopt a very basic pricing model of a price per room for 2 people B&B, in any room and on any date. This will be very simple for you to administer and manage. But you are missing out on so many opportunities if you do. At times of higher demand you could be charging a higher price and at times of low demand, you may want to charge a lower price to stimulate demand. You may also want to discount the price for multiple-night stays to encourage longer-stay guests. At one end of the spectrum there are B&B’s who simply provide a cheap, clean place to stay, who’s rooms are not all en-suite, who have single rooms and provide a continental breakfast. Typically these would be charging £20 per person B&B. At the other end of the spectrum we have B&B’s with a variety of luxurious en-suite rooms, providing a very hearty full breakfast and charging just under or over £100 per room B&B for 2 people. A very simple calculation would tell you that if both B&B’s are full year-round and each have 3 rooms, the former is generating income of £21,900 and the latter £109,500! Having said that, the costs of operating the latter B&B will be far higher. But this sort of calculation is very good at focussing the mind on what sort of investments it is worth making in your product if it thenmeans you are full for more nights of the year, and also getting more money per room. A higher price also gives you greater opportunities for seasonal discounting, long-stay discounts and multiple room discounts. But, also bear in mind that once you start charging over £70 per night you are then competing with hotels, not just B&B’s. Most B&B’s with twin or double rooms charge per room B&B based on 2 people sharing. At busy times, you would only want to discount this price by the cost of the breakfast for single occupancy, but at quiet times you may want to only charge half the price for single occupancy. There tends to be B&B’s whose business is primarily contractors, sales people and those visiting local relatives. This type of business will tend to be fairly full year-round, but won’t be charging a very high price. Contrast this with B&B’s in tourist/holiday locations, who’s business is very seasonal and who typically are full in the summer months and school holidays at a high price, but empty for the rest of the year. These produce 2 completely different business and pricing models. As the expectation is for many people to stay in the UK for their holidays this year, B&B’s should have their best year ever. But, bear in mind that many hotels have lost a lot of business and are dropping prices. Ensure that your web pages show potential customers the type of experience you offer and that your price is a fair reflection of what they can expect. Make your pricing very clear, so that people understand that staying with you in August may cost them more than if they come in October. As a business person you should calculate how many days per annum you have rooms empty, and consider whether offering a lower price at those times would generate business. Conversely look at all the days you are full and assess realistically if you could charge a little more without losing business. At the end of the day, you are in business to make a profit and the level of your pricing is probably the biggest single influence on the level of profit you will achieve. In the final article we will discuss how you promote your B&B in the right places. Pamela Carvell is long-standing Chairman of the Hotel Marketing Association, has a degree in Marketing and has run sales & Marketing consultancy Pampas for over 17 years. Clients range from multi-national companies to small private hotels. She is happy for you to publish this article, so long as she is given credit for writing it, and the copyright remains with her. www.pampastraining.com |
