I remember the good old days when Vegas was cheap. Inexpensive flights, rooms and buffets. Don’t get me wrong. I like the new Vegas much better. It provides a complete entertainment experience and offers something for everyone. I’m happy to pay for it, but $22 water?
This is a true story. During a recent visit, I grabbed two 1.0 liter bottles of Fiji water from the minibar. I questioned the bill when checking out because I couldn’t figure out what they thought I took out of the minibar that cost $44. As it turns out, water… I’m not kidding. Didn’t people get in trouble for price gouging a few years ago for selling cases of water at inflated prices to hurricane victims?
Fiji water is a good product so I’m not complaining about that. However, it turns out that I can buy it much cheaper elsewhere. As I write this, I’m on Fiji’s website and I can buy a case of 12 bottles for $29.60 or roughly $2.50 per bottle. $2.39 a bottle at Whole Foods with free two-hour delivery. So, what gives?
This is a clear and extreme case of “situational pricing”. Situational pricing is a form of dynamic pricing strategy that takes certain conditions into consideration when setting the price such as shortages in supply, lack of perceived substitutes, peak times, time of purchase, and very simply, a customer’s willingness to pay more. We see this in the airline industry where a last-minute ticket is going to cost you. Likewise, with Uber Surge charges. In my case, aside from the fact that I didn’t know the water was $22, I was in Vegas. I didn’t want to leave the hotel to go shopping, and in general I was willing to spend more than I otherwise would.
As CPA’s, do we utilize situational pricing in our practice and strategy? A common area where we do this is with seasonal price adjustments to capture busy season premiums. A better question is, how can we or, where else can we? One clear way is to provide something that is unique and differentiated. Another is to evaluate our clients price sensitivity or one’s willingness to pay more than another. After all, beauty is in the eye of the beholder.
What are your thoughts on other areas of opportunity for situational pricing?