Buyer beware: underhand pricing strategies
After I recovered from the shock of the quote for some minor orthodontic work, I realised my orthodontist had used some very savvy pricing strategies on me, some of them not very ethical.
I was presented with a hand-written note outlining the cost of the proposed treatment. At first, second and third glance it appeared to be around $2,000 (which I admit I thought was a lot of money). I repeated this figure out loud to the orthodontist and he sat absolutely still. I then systematically worked through the calculations, and gasped when I realised the quote was actually for $6,000. Again I queried the orthodontist, and he still didn’t move a muscle.
I repeated my question a second and a third time before he finally came out and agreed that the confusing hand-written numbers actually resulted in a proposed total for the work of $6000.
Personally I am not a fan of ‘buyer beware’ pricing strategies, I like it to be plain and simple. Many successful (read ruthless) businesses employ this pricing strategy to their profitable advantage, but I wonder how satisfied their clients are?
In shock I returned home and started ringing around for different quotes. Every single practice I spoke to quoted $6000. Of course they dressed the proposed cost up differently, but it still came back to the same original quote.
"Successful businesses are aware of what their competitors are charging and what the client is prepared to pay. Are you?"
Cartel pricing or price fixing is illegal and can be reported to the consumer watchdog, but is difficult to prove – as in this case. I’ve got no evidence that the orthodontists are all in cahoots together, but you can understand why it smells a bit fishy, can’t you?
On the other hand, successful businesses are aware of what their competitors are charging and what the client is prepared to pay. Are you?
Divide and conquer pricing
The original quote was divided up into an initial consultation and a final consultation, with the remainder of the costs divided into monthly charges – even though we would only be seeing the orthodontist every six weeks!
This is a strategy in which the price is broken down into a seemingly insignificant amount, so that the whole procedure appears cheaper than it actually is. If you’ve ever seen anything advertised as costing ‘less than a cup of coffee a day’, you’ve seen divide and conquer pricing in action.
Pay for a quote
Although it was dressed up as the initial visit, I had to pay for the quote. This process actually made me reluctant to undertake proper price comparisons in case having more ‘initial consultations’ meant I was throwing good money after bad.
Interestingly the consultation was actually the pre-initial consultation; I still have to pay for the initial consultation!
Do you charge a flag fall when you provide a consultation for a larger project?
Share the cost
The orthodontist was quick to point out that my private health insurance would cover part of the cost, again trying to instil the perception that the procedure is cheaper than it actually is.
Are there factors that could offset your prices? Are their government incentives? Are there ways your clients can minimise your costs?
What do you think of these pricing strategies? Do you utilise any of them? What pricing strategies have you had success with in your business?