Marconi: Don’t Apologize for Your Prices
About a month ago, my wife and I went out for dinner at a local restaurant. We arrived around 7:00pm and we could sense that something was off. Although restaurants are back to 100% capacity, it was obvious that about half of the tables were removed. They weren’t as busy as usual either. The staff appeared somewhat stressed. I then looked down at the menu and I couldn’t believe what was stapled to the front of the menu. It was a large note that said: “We apologize for the increase in prices. With expenses rising, and with the loss of business due to COVID, we have no choice but to raise the price of our meals. We hope you understand and please let us know if you have any questions.”
When the server came over to the table to take our order, I asked him what prompted the apology note? He replied, “Hold on, let me get the manager.” A minute later the manager walked over to us, and I repeated the question. He said, “The owner wanted to avoid any issues before customers noticed the price increases.” I asked the manager if anyone had complained about prices before the note? He responded, “Well no, but we hadn’t raised the prices yet.” I continued, “How many people now complain about the price”” The manager said, “We get a few each night now after they read the note.” This was getting interesting. I had to continue, “How much was the increase in your prices?” He replied, “Just a few bucks on some select meals. Oh, and we removed some of the meals on the menu to help control expenses.”
I almost held back, but I had to say it, “So, you increased prices, reduced the choices on the menu and you removed some of the tables due to staffing issues. You had no complaints about your prices before, but now you do. Could it be you overacted?” The manager looked confused and said, “What? You think we brought this on ourselves? We had to increase prices.” I replied, “I am not faulting you for raising prices, but it looks like you reduced the value of your services and put the price increase right in everyone’s face. If I were you, I would remove the apology note and focus on the customer experience.” The manager said he would speak to the owner.
We went back to that restaurant with friends this past Saturday. The note was still on the front of the menu, the place was nearly empty, and the mood of the entire place was somber, at best.
This restaurant, like many businesses, endured hard times due to COVID. The monetary losses had to be overwhelming. This had to influence the owner’s decision to create the apology note, along with removing tables, and reducing meal choices. In his defense, he did not want to lose any more business. However, the decisions the restaurant owner made resulted in hurting the customer experience. By creating an awkward and negative experience, people actually starting to pay attention to the exact thing the owner was trying to avoid. Price!
Here’s the lesson. No business should ever apologize for its prices. Prices are determined by calculating the cost of sales, operating expenses, and labor costs. Price is also a reflection of your brand and largely determined by the level of value of service you deliver to the customer. When a company delivers on value, price becomes less of a concern to the consumer, especially for your key profile customers. However, when you reduce value, beware. When value goes down, price becomes a big concern. In fact, you will then be judged by your prices.
In bad times, it’s normal to react defensively. But we need to resist that. In tough times, it’s better to go back to basics. What makes your company great? Why do people buy from you? I can guarantee you that price is not as important as you think it is. Ensure that each customer has an amazing experience. Focus on your employees too. This is where leadership comes into play. Be careful what you focus on. This restaurant owner obviously focused on his financial losses and his fear of raising prices. This created a negative culture within his company, and employees will always react to the emotions of their leader.
It’s far better to remain positive, telling your staff that we’ll get through this. If you are going to raise prices, then make sure the experience you deliver to the customer is in line with your prices. Remember, when value increases, price fades in the mind of the consumer. When value is reduced, expect a reduction in business too.