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In my first college Economics class, I learned about the relationship between supply and demand. Put simply, when there is scarcity of supply, prices tend to rise. Conversely, when supply is plentiful, prices tend to drop.
This can also be true as applied to the ‘perception of short supply.’ For example, the fear of a gasoline shortage, can actually cause one. How? Because the largest storage facility is the collective capacity of everyone’s gas tanks.
If many people, who normally fill up when their tank is down to one-quarter full, suddenly start refilling at three-quarters full, a shortage of supply, out of stock situations, and consequently, price increases will follow.
Gasoline is a commodity, and can be stored for consumption on another day. Perishables, such as airline seats, hotel rooms, or available inventory for wedding services on a given day, do not carry over.
If a bakery has the capacity to bake 10 cakes on one day, and only bakes 5, it can’t bake 15 the next Saturday. The revenue is lost, period.
Such is the case with hotel rooms in Las Vegas. A small item in this morning’s paper, noted the current pricing of local hotel rooms.
A year ago and more ago, occupancy for Las Vegas hotel rooms was running 92-93% on a 365-basis. Getting a room at the Bellagio usually meant spend $300-400 per night and more. Finding a rate under $100 per night at a Strip hotel was confined to one or two properties, during a very slow stretch.
The logic, of course, is keeping the hotels filled so the show rooms are active, the restaurants are busy, and the casinos are bustling. This translates into minimizing layoffs, and maximizing revenue.
While your pricing is typically not as public as a hotel room or an airline ticket, you should quietly assess whether your overall pricing model is consistent with the activity of the venues and the marketplace, generally.
Don’t jump to slashing or discounting prices, but really examine whether what your product or service was selling for, three months ago, is applicable, today.
Don’t let your ego in the way. It’s not about ‘what I’m worth,” Right now, and in the immediate future, it’s about ‘what the market will bear.’
Think clearly, decide slowly, and have a succinct plan.
Andy Ebon
The Wedding Marketing Blog
October 18th, 2008 at 3:51 pm
It’s hard to step aside of one’s ego and truly look at market supply and demand when setting pricing. Do what you, firmly believe, is right for you and your market and in the end I believe, that you will be successful. It takes a community to make a business, not just a person.
2. Alan Berg Says:October 19th, 2008 at 9:41 am
A ray of hope in this discussion is that the supply is actually increasing in the wedding business. At theknot.com we’re seeing the highest new membership for the first 9 months of 2008 that we’ve ever seen in our 12 year history. The Echo Boomers, the children of the Baby Boomers, are coming of age and are filling the wedding pipeline. Many in the industry expect a 30% increase in weddings by 2018. We’re up over 12% in new members over 2007, year to date.
In a market where the supply is increasing you don’t have to lower your prices to get business. What you need to do, as Andy and I advocate, is to be the best you can be at every point of contact with the brides… your ads, your website, your phone manner, your office… everywhere. Make it hard not to do business with you by being so professional that they can’t imagine using anyone else.
Now is the time to evaluate everything you do, while your competitors are crawling into their shells waiting for the sky to fall. Brides don’t approach their weddings thinking it’s practice for the second time, they want to do it right, regardless of the economy. Will some brides cut back on some things? Sure, but the majority will do whatever they have to in order to have the wedding they have always wanted. Tune out the naysayers and you’ll be able to thrive.
3. andyebon Says:October 19th, 2008 at 12:03 pm
Thank you, Crystal and Alan, for your comments.
What I fear most, in the behavior of the industry, is a knee-jerk, ostrich-like, reaction. Proactive action is paramount.
Andy