Price is Relative – Cost is Personal


When I first joined the spa industry back in 2005, there was really only one question when it came to the pricing of our treatments – How much will we increase our prices this year? To be clear, the question was about how much more we could increase our prices. I mean, above and beyond whatever we needed to cover any increases in the costs of delivering those services. These were the days of The Great Spa Bubble. They were the days of if we built it, they would come. Those days are gone.

Today, spas in hotels have become much more commonplace. I’ve written about this before in Commoditisation of Spas. And as with any commodity business, pricing has become a much bigger issue. Whereas once it was relatively easy for spas to differentiate themselves on the basis of a few unique features here and there, today’s ever-discerning spa consumer is demanding much more of us. For those that lack the truly unique features of their competitors, they are often forced to compete on price. Sure, you can compete on your great service, but that’s a lot harder to sell. Especially in the short term.

History shows us that a competition based on price alone often ends up as a race to the bottom.

But here’s the thing, price is a construct of the seller. What the buyer really cares about is the cost – to them. ‘Isn’t that the same thing?’, I hear you say. Kinda. The actual number itself may well be the same thing for both, but the reasoning and emotions behind each one are very different. Let me explain what I mean by this and how, by focusing on the buyer’s cost rather than the seller’s price, you might just be able to find a meaningful way to compete.

When I come to your spa, it’s going to cost me two things – Money and Time. You need to give me value for both if you want to get me and retain me as a customer.

Most spa managers I talk with think they’ve got a pretty good grasp on the concept of Value for Money. Complimentary use of the steam and sauna facilities, is a value add, they say. But in reality this is more about them justifying the price. If they really looked at this through the eyes of the buyer, would they still say it’s Value for Money? Some guest for sure would rather save $15 on the cost of that treatment and not have access to those facilities. Remember, your guests really only care about their cost. And it’s not just a question of money. Adding another 30 minutes to their spa visit just isn’t an option for many of our busy guests. If you’re asking me to pay a bit more money and spend a bit more time, you’d better make it worth it. For most of us, we only have a limited supply of both those things.

One of the great ironies of the advances we’ve seen in technology is that we now seem to be more time-starved than ever. The truth is, of course, we also probably waste more time now than ever before. Either way, ‘I simply don’t have the time’, has to be the most common excuse for just about everything these days. (And if it’s not that, it’s ‘I simply don’t have the money’. ) I think spas sometimes take for granted that what their guests really want is to spend an hour or so just chilling out. No doubt, many would like to do that. But guess what? They simply don’t have the time. 😉

So maybe instead of pushing your guests to arrive 30 minutes before the treatments so they can enjoy the facilities, you should be thinking about how to save them time. Could your registration process be streamlined? What about the arrival and welcome ceremony/ritual? The departure experience?

And maybe instead of Value Add, you could think about Cost Minus – ie: reducing the inclusions and the price.

I know that sounds a bit counterintuitive. I mean, we’re all trying to find ways to increase our revenues, right?

But in a commodity business, value is the key. And sometimes to deliver that value, the best strategy is to provide less, for less.

Because value, like cost, is personal.

And Value is in the Mind of the Perceiver!