The Best Email I’ve Ever Written About Price

A Post by Red Robot Published June 19, 2019

It was a cold winter’s morning in the depths of May. The fog of the night was only just lifting to leave the frosty remnants of its eerie dance upon the leaves and grass and any surface that stood still for long enough. The cities inhabitants begrudgingly tracked their way through streets, trains and trams with hot coffee warming their noses – a small comforter in the face of the prospect of yet another day in servitude to a job they hate and a system that doesn’t appreciate them.

Yikes! That was bleak. But mornings like this are always my favourite because they’re all about possibility. The morning represents yet another day to make an impact and gain fulfilment. Being a business owner is one of the greatest ways to take control of our situations and achieve the things we want in our lives.

It was on that morning that I received this email below from one of our new customers. I have received this kind of message before and had the same conversation a number of times over the years. I think this particular time, my response was one that I am most proud of – resulting in quite possibly the best email I have ever written on the topic of pricing.

I’m sharing this with you because I think it’s an important reminder not to let the actions of others define or restrict you, in business and in life.

So here’s the email I received, and you can clearly sense the frustration and feeling of doom the business owner was experiencing when she wrote it. I have changed the name of the sender but everything else is pretty much as it was.

Hi Phil,

We are very very disappointed with one of your customers. I had an event with her and I couldn’t believe how much she is charging. She is charging $750 for 2 hours and every additional hour, she only charges $180!!!! Don’t even think about selling more Mirrors here with other customers because THEY WILL NOT GET ANY CLIENTS!!! We only had 1 event since we bought the mirror and it’s with her. And now, our mirror is sitting in our home, doing nothing. As in nothing! They are pushing us away out of business. There is nothing we can do, both of our mirrors are from Red Robot. I am emailing you just to let you know what is happening with our mirror now. Other owners couldn’t believe it as well. We all price our service almost the same with them.
We don’t know what to do. My partner is thinking of selling the mirror now because it’s a complete waste of our money.

Just frustrated,

Frustrated business owner.

I felt for this business owner. She had done everything right and the tone of her email was laced with fear about things that had not happened and were highly unlikely to happen ie. not getting any customers EVER. It’s such a common situation and I have been there myself so many times as has just about every business owner on the face of the plant. She was getting in her own way, all she needed was a faint glimmer of light at the end of the tunnel to bring her back on course. So I gathered my thoughts, sat down and wrote this from start to finish.

Hi Frustrated Business Owner,

Firstly, thank you so much for reaching out and letting me know how you feel. Seriously! Just about every company in every industry goes through this and most just struggle on in silence, never ask for help and just slowly get more and more depressed and desperate about it.

I can’t even put a number on how many times we have been undercut on price over the last 10 years in business. If you check out all the FB forums in the industry, just about every 3rd post is about this topic. It’s only because I have done this for so long that I have learned the hard-won lessons about dealing with people undercutting you on price. And we must know something about it because we are still here, right?

So, in order to help you out with this, I’m going to be a little bit blunt – because you need to hear it. First up, you’re throwing the baby out with the bathwater here. You’ve hardly been in business very long and you’re talking about giving up at the first sign of difficulty. Here’s the blunt bit: welcome to running a business! If it were easy everyone would be doing it. You started this business for a reason – don’t lose sight of that motivation. You can’t control what other people do in the marketplace – you only have control over what you do and how you let it affect you. If you let it demotivate you, that is 100% your choice. If you let it motivate you to be better, that is also 100% your choice.

Having said that, let’s look at some of the facts. $750 for 2 hours and $180 per extra hour makes $1,110 for 4 hours – which is actually not bad at all. Most operators in Aus range from $800 for 4 hours up to about $1200 on average. If they were charging $750 for 4 hours then yes, they would be going out of business pretty fast. One of our top end clients in the most competitive market starts at $1800 per event and is constantly turning down bookings because his calendar is full. So how does he do it?

So now it comes down to understanding your clients and making a decision about which way you want to go. Only about 20% of people planning an event or wedding are only interested in price. The other 80% are motivated to create an amazing event, be remembered by all of their friends and family, and have everyone have a wonderful time so that it reflects well back on them. So they want an incredible EXPERIENCE because it makes them feel superior about giving something to the people they care about most. Others are stressed to the hilt and just want the best and most reliable operator to take some of the stress of their hands = TRUST. The point here is that money is only a motivator for a small segment of the market. Most people actually want VALUE for money rather than lowest cost.

So here is the choice part. If you want to play only to the small sector of the market that only cares about price, then your strategy should be to undercut everyone on price. You’ll need a lot of Photo Booths to make this work successfully. If you don’t you’ll most likely end up resenting your business because you’re doing heaps of low-value work to make little to no profits.

If you want to play to the rest of the market that cares about more important things than money then here’s what you need to do. This is called the benchmark pricing strategy. You need to have worked out how much you need to make per event to survive (cover costs). This is your absolute minimum cost. Then you work out how much you want to make. Is it $1200 per event? is it $1600 per event? It actually doesn’t matter what it is. What you then need to do is to look at the market and if everyone else is charging $1100 and you want to be at $1600 for example, you need to look at everyone else’s prices as a benchmark, and NOT a limit. You need to work out what the others are offering for $1100 and then work out how you can add in $500 worth of extra value. Do you throw in all the extras? Props, red carpet, bollards, albums, booth butler etc? Do you have better image quality? Do you have better reviews? Do you offer better packages, more creativity, more interactivity, better service? Do you have better marketing and branding that makes people feel safe that you are trustworthy and reliable?

To do this you also need to be prepared to accept that some people are just not your customer. If they only care about price then you need to be ok to pass them over and say to yourself “we are not right for everyone”. Know this: every time you pass on a cheap customer, you are halving your workload. Instead, you are making the same amount of profit on one booking as you would in two or three bookings. Ie if your cost is $500 per event, a $750 booking means $250 profit. A $1200 event means a $700 profit. You would have to do 3x $750 events to make the same profit. Less work, more profit means you can spend more time on developing and doing things that add value (learning new skills, improving image quality, sourcing better props, contacting people for feedback and reviews, improving your website, learning Facebook ads, creating new content, networking and developing links with venue operators and marketing companies etc)

This industry, like so many others, is full of people who let other people’s actions hold them back. They make excuses in their heads as to why they can’t do better “because XYZ is charging less than me and they’re going to get all the business” or “the people in my area won’t pay that much”. If you let that stop you then you are just giving yourself permission to fail. That’s what most people do. So instead, be the top 10% and give yourself permission to succeed.

I hope this helps.

Rgds,

Phil.

I’m glad to say that this particular customer took on board everything I said – and then some. She has an incredible website, nothing but 5-star reviews on Facebook, great image quality and customer service that is exemplary. She invested in herself and invested in her craft and is now one of those top 10 percenters (I just hope she doesn’t mind me posting this).

Whether you’re looking to start a business, already have one or just resonate with some of the same fears, by sharing this story, my hope is that you can take something from this that will help you on your journey.

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