04 May 2006

Pricing the service

Earlier today, Phil and I were at a champagne reception. We were pleased to be there. It would have been churlish to stay away. We had supplied the champagne. During the reception we chatted to someone who owns and operates a couple of serviced offices. He had some interesting stories to tell about the way the business had moved over the last few years. When he opened the facility that we were in today, he aimed his pricing to be roughly 25% below the market leader because it was his perception that the leader was offering a 5 star service which he couldn't easily compete against.

That was some time ago - almost exactly 5 years - and today he commands premium prices while the famous name supplier discounts its prices below his. He is confident that his service is better than the household name competitor. He is at 94% occupancy and has just closed a record number of deals in the past 2 weeks. Business is looking good.

His take on serviced offices is that while having high-tech offices may be good, and having well decorated space is a basic requirement, the key to success is having really customer focused staff who are prepared to go a little bit further in order to make things work perfectly.

His current sales pitch is that he may not offer the lowest prices, but he does offer the best value. That's a sales technique that many small businesses forget. They can get so anxious to close business and so obsessed with winning a deal that they can take on work at margins which are derisory. That's not to say that the last 5 years have been continuous success for this businessman - far from it. Despite those ups and downs he seems to have established a formula that works and is now running the business very profitably.

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