Is your pricing strategy crushing guest satisfaction?
Is your pricing strategy crushing guest satisfaction?
Establishing your pricing and keeping your guests happy is challenging to say the least. But do this well and you’ll increase your customer satisfaction rates as well as your revenue.
According to a study by Aurimas Dapkevicius and Borisas Melnikas, Lithuanian researchers from Vilnius Gediminas Technical University, “Higher customer satisfaction is based not on real quality, but the price as they use it as an indicator of product quality.”
They go on to conclude…
“On the one hand, it is a fact that when people perceive that a product is overpriced they are less likely to make a purchase. But, on the other hand, now we have multiple studies showing that people enjoy a product more when they pay more for it.”
So how do you know if you’re charging too much or too little to keep your guests satisfied with the amount they’re paying in relation to the quality of service you offer?
Pricing and customer perception
In most cases, if a hotel room is more expensive than another, people will conclude it’s better, even if it isn’t.
What do you think? If you were offered two similar rooms with the same features at £75 and £150, which would you assume is better quality? The one priced at £150, right?
This pricing strategy is often called price-quality signalling. It serves to price your service higher than your competitors, and is supposed to signal your rooms are of better quality.
Your services become desirable not just because they’re good, but because they’re expensive. As you become more expensive the desire increases.
Your prices affect how customers perceive you. The perceived quality is not just recognised in the quality itself, but because your higher prices indicate quality.
As customers use price to distinguish quality, if you charge more your customer will expect more.
So in this case, to maintain high levels of customer satisfaction you need to ensure you’re delivering a premium service — anything below premium will result in poor guest satisfaction levels.
On the other hand, low prices can encourage scepticism. Pricing below the market average leaves customers with a ‘too good to be true’ vibe and can push customers away. If they do take you up on your offer they may be hyper aware of the faults and shortcomings within your hotel which leads to low satisfaction levels.
But if you offer premium rooms in a medium price bracket, going beyond customer expectations, you can expect high customer satisfaction levels.
Is your pricing in line with your quality of service?
You need to ensure you’re charging enough to deliver high customer satisfaction. If you’re charging too little just to undercut your competition, the state of your hotel and the services you offer can fall below par.
This means you’re attracting customers who still expect a certain level of quality, but could end up disappointed to see your lack of maintenance and attention to detail.
If you’re consistently achieving high satisfaction levels, you can absolutely charge more. If you’re wondering why your competitors can offer a superior service, it’s most likely because their rates are higher.
If you can justify putting your prices up because you offer a premium service, you’ll find you can invest in more resources to improve your customer service, and in turn improve customer satisfaction.
So the biggest question is — are you charging enough to deliver the quality of service you want to offer your guests?
Is your pricing attracting the right guests?
It’s true for many businesses worldwide, hotels with cheap prices can attract guests with unrealistic expectations. Value-for-money pricing also draws in guests looking for a great deal.
Therefore, if you’re looking to increase your rates per room, you can expect to change the audience you attract.
Different customers come with different expectations.
Your current target market may like your hotel, but are they really your best possible match?
When your pricing hits the spot with your ideal guest you make it easier to achieve a positive overall experience.
Your pricing strategy needs to reflect the desired positioning of your hotel to attract the right guests, with right expectations to improve your customer satisfaction.
What your customers really care about
The secret is — customers are more interested in reasonable rates, not always the lowest prices.
When customers search for a hotel, it’s not necessarily the highest or lowest rates they’re looking for. They care more about how fair your pricing is in relation to the value you provide. This is when customers are more likely to develop a trusting view of your business.
When customers believe your pricing is fair, they’re far more likely to form a positive opinion of your hotel.
On the other hand, if you’re drastically under priced and offer more value than the amount you charge, this not only has a negative impact on your profit margin, your customers may view the deal as too good, and you again damage your customer satisfaction rates.
Over charge, and customers will leave feeling unsatisfied with the level of experience they received for the amount they paid.
Pricing your rooms correctly clearly has a significant effect on customer satisfaction. If you struggle to keep your guests happy, try re-evaluating your pricing strategy to reflect your target customer’s perceptions and expectations.
Get it right and you’ll have elated guests who’ll recommend you to others. Get it wrong and your guests will leave upset and could damage your reputation. Always focus on making your prices fair and reasonable in relation to what you offer.
The Booking Factory
