With the COVID-19 pandemic raging around the world, the wedding industry has been decimated. With the weddings halted all over the world and demand for their services plunging, many small business owners have to make tough pricing decisions to stay afloat. As small and medium businesses represent about 90% of employers, it is crucial for the health of the economy for business to survive these turbulent times.
With the demand dropping to unprecedented levels, the first reaction of SME (small and medium enterprises) was to cut prices, hoping that the reduction will drive new volumes that will offset the drop in revenue.
While such knee jerk reactions might help in the short run, they could really hurt when the demand is back to normal levels. Rethinking your pricing strategy no matter if you are a wedding photographer, videographer, officiant, planner, DJ, limousine company or photo booth owner is crucial for your survival and future growth.
Sadly, in a very creative business, most wedding companies think of pricing as having only two levers: raise or drop prices. In our opinion, there are so many more ways to address the new business reality through pricing.
For example, one of our suggestions is to maintain the prices untouched, but offer a better value. If you are a photographer, include bonus time in your packages. That 2 extra hours will not cost you a lot, but for your brides that represents a $500-$600 savings.
Based on our discussions with several wedding photographers, cutting prices did not translate into shooting more weddings, so the net result was a drop in the revenue levels. If you drop prices by 20% you will need a volume increase of 25% to maintain the same revenue levels.
Sadly, the budget offerings do not attract new business and worse, you will end up booking the same number of weddings, at a lower price.
The most successful pricing strategy is to offer a three tier packaging structure. One that is very expensive, one that offers a great value and one that is cheap. Careful pricing and packaging will make the mid package provide best value and many companies encourage the purchase of the mid-tier by reminding you it is either the “most popular” or because it offers the “best value.”
According to the Goldilocks pricing, clients gravitate towards your middle range package. As such, by offering a lower option, you create a new middle range and “push” your couples to that new mid tier.
There are three steps in making a buying decision: first, the bride will decide if she will buy or not. Second, she will decide on the package and most brides will pick the middle package. Finally, now that the major decisions have been made, the beautiful bride will purchase some high margin add-ons. Airlines and car rental companies realized that 50% of customers upgrade, so in the front line compensation there is always a commission element to encourage selling the high margin extras.
Did you ever buy a camera? Once you bought it, the sales representatives will offer you an accessory (lens, filter, bag) to “protect your investment.” The cover is often 10-20% of the cost of the main product.
Psychologically, our grit or determination is finite and once we made the main purchases, we let the guard down and are more susceptible to upgrades.
Also, many couples still have a lot of money or their parents are paying for the wedding, so the couple is not price sensitive. A good option is to partner with a high end professional and set up a referral program whereby you pay a certain percentage of purchase for each client referred.
Instead of offering across the board discounting, professionals can offer smart discounting. That type of discounting is called by pricing experts discounting with dignity.
The attributes of smart discounting are: first, this is a one off discount. Second, you set a mandatory volume: for example, for minimum 12 hours of photography, you will get 5 large prints.
We firmly believe that the wedding industry will bounce back even stronger than before the pandemic. After the long lock-down, there will be a baby boom period and many couples will decide to tie the knot. Also, couples who were planning to get married before the virus hit still have the budget and will want to revenge the wait by having unforgettable parties.
Post COVID-19 there will be an increase in the number of weddings. The couples who were planning to get married in 2020 were forced to reschedule their big days to 2021.
In addition, we will have a new wave of babies as a result of the knockdown and that will result in more weddings.We estimate that in normal conditions in 2021 the number of weddings will be 2.5 – 3 times larger than that in 2019 as a result of the pent up demand.
As such, dropping prices now will only help the future couples buy your services at a serious discount, and that will hurt your bottom line in a period of high demand when your prices should be increasing.
In 2009, Hyundai launched a program whereby if a client lost their job, they could return the car with no penalty. As a result, while the car sales dropped by 20%, Hyundai sales increased by 8%.
If you believe your couples are concerned about their jobs, why don’t you offer a similar option? If any of your couples lose their job and wants out of the contract, offer to refund their retainer with no penalties.
Ask your clients what they think about your pricing! What alternatives do they have and do they like their options?
We believe you should not touch the pricing levels for the next two years but rethink your packaging. As we said, offer more value and remove the offerings the clients don’t like.