ON BUSINESS || Never Misprice Your Goods or Services (3 Scenarios That Illustrate the Damage)

No one likes surprises.

I can't stress enough the detrimental effects of setting wrong pricing expectations in business.

You never want to increase prices if you can help it. However, in the past year, it seems like many businesses can't (ie. won't) help it and are taking the opportunity to bump revenues up. There's only so much abuse consumers will take before they drop you. Pricing instability is what I would categorize as consumer abuse. I can understand if the cost of petrol and labour as inputs suddenly make it twice as costly for you to transport a carton of eggs. However, if your miscalculation results in additional hours and inputs needed to complete the job, it tells your customers you don't know how to run the business. Don't be that company.

Here are a few scenarios where businesses mispriced their outcomes and made customers carry the bag.

SCENARIO 1 | Professional Services

A vendor quoted us how much it would cost per quarter for us to retain their services. We agreed on the price. At the end of the first quarter, they called and said it was taking more time than they expected, and they are requesting to increase our price by a whopping sixty percent—the audacity! Oh, and they want to retroactively apply the price increase to the quarter of work they have completed. We eventually agreed on a much lower cost because, at the start of the contract, we had discussed the work potentially taking a bit longer than expected, but not SIXTY percent longer.

What does this tell me as their client? They have very poor judgment (but we aren't retaining them for anything strategic, and it's more for something routine, so this doesn't matter). Would I trust them when they give me another quote? No.

SCENARIO 2 | Strata Management

Being a homeowner and an investor in real estate, I caution anyone getting into property ownership to take a hard look at the costs outside of the purchase price for a home. In particular, strata fees, because this line item has never gone down, at least in the number of years since I've become a homeowner.

Most people would say they don't have the time to be on the strata council, but the types of items strata vote on are amazing. You should really see the level of craziness that's unleashed; it's a perfect description of having 'too many cooks in the kitchen.' Some will want to fix the pool railings; others will want to change the carpets, and some will feel that it's crucial to paint the exterior of the building (because they want to sell their unit in the next six months).

It's common sense that everything you want to do will cost money, and unfortunately, this results in your strata fees skyrocketing and additional extraneous costs that you have to pay out of pocket. For my first condo property, my strata fees increased by THIRTY-FOUR PERCENT after the first year. What do I think of the people running the strata? They probably make bad financial decisions in their personal lives as well. Let's hope I won't be seeing them in the elevator.

SCENARIO 3 | Any Subscription Service

Do you subscribe to Netflix? Spotify? Amazon Prime? Costco? What's one thing they have in common? Price increases for their membership.

The pricing changes aren't scheduled and seem to come in a steady stream, especially when times are tough for businesses; they have to milk the same number of customers for more dollars per subscriber. Hey, it's just business.

With each price increase, companies are testing the price sensitivity of their target audiences. How many people would drop off if we upped prices by five percent? Ten percent? Twenty percent? It's similar to an abusive relationship; how much cr*p would you tolerate before you leave?

You originally signed up for $9.99/month, but now it's $16.99/month. You're still here, but are you disgruntled? What would keep you from switching if there was a substitute at a lower price? Exclusive shows or artists? How many hardcore, die-hard fans will stick around with multiple rounds of pricing increases?

I guess we'll find out.