March 7, 2011
I made reservations over the weekend for my annual spring long weekend, no kids getaway with my wife. The experience of making the final booking provided a great illustration of the importance of simple pricing for any consumer offering.
One thing I’ve learned about resorts that have a lot of services and options – golf, spas, multiple restaurants, nature activities, etc. – is that they can confuse the hell out of you with their pricing. When talking to our first choice destination about their various ‘special packages’ I was completely overwhelmed by choices and options as I tried to figure out the best deal. The number of pricepoints and packages seemed endless. Would I do better a la carte or with a package? And which package?
After about 10 minutes sorting through the options with the reservationist I told her I’d call her back. I hung up the phone and literally started building an excel spreadsheet to figure out which package offered the best deal given what we wanted to do. And then I realized just how asinine that was, and I called our second choice. Still more complicated than it should’ve been, but simpler than Resort #1. Resort #2 got our business.
Resort #1 had the setup and services that we most wanted, but I just couldn’t get past the fact that it was impossible to understand the pricing – was I getting a deal or getting hosed? It seemed crazy to have to build a spreadsheet to figure it out. How many customers are they losing this way?
If you have a pricing model in your business that requires people to do complex math, you are without question going to hurt your conversion of prospects into customers. It’s bad enough in high dollar b2b sales, where you’re likely selling to a manager who is armed with all the tools and incentives to make complex choices. Even then, decision-makers get bogged down by spreadsheets and analysis. But in consumer applications, you can trust that the smallest bit of complexity in the user experience will cause big numbers of people to drop out. People just don’t want to force their brains through analyzing how much of a deal they’re getting or trying to ensure they’re not actually getting hosed. It’s hard enough to design beautiful, seamless user experiences – don’t add to the complexity by obfuscating your price-value equation.
I’ve been thinking about this a lot recently in the context of one of my favorite recent investments – VillageVines. VV has built a fantastic service for helping discerning diners explore new restaurants by offering them discounted tables at places that have unreserved tables. Think Hotels.com, but for the restaurant world. No coupons, no cards, just savings. I wrote a detailed post explaining our excitement about the deal a couple months ago.
VillageVines is doing incredibly well – growing 40% month-over-month for the last six months. But I also know that we’d be doing even better if we didn’t require our customers to do some up front math. You see, the core VV offer is that you pay $10 to book dinner reservations through us, then get 30% off your entire food and beverage bill (that $10 fee is our revenue model – no money moves between VV and the restaurant, a key feature of the model). It’s a pretty phenomenal deal. All you have to do is have a $33.34 pre-discount bill and you’re definitely coming out ahead. With our focus on fine dining restaurants, that’s a given. The more you spend the more you save, as they say. As an example, I took a close associate (and big time foodie) out for a very, very nice dinner a couple weeks back at Le Circque in NYC, paying him back for a HUGE favor he had done me. Booked through VillageVines and saved $120. Pretty good return on a $10 investment, and an awesome experience all around.
But still, as good as the offer is, we’re requiring people to stop and think about the experience. “Hold on, so I start by paying $10 to make the reservation, then how much do I have to spend at dinner to make that a good deal? And if I spend $150 on dinner, how much will I have actually saved?” When you get through the math, you get to some pretty clear and compelling answers. But it’s driving me crazy that we make you do that math at all, and I know we’re losing some would-be customers along the way.
I’d love to hear any thoughts or suggestions for how we might improve the VillageVines model. We know we’re making consumers and restaurants very happy – filling empty tables for restaurants, and offering great deals for diners – but we’d like to spread the love even further, and with less confusion. So share your thoughts liberally!
And as you’re thinking about pricing in any business, especially in consumer services, do your very best to avoid turning consumer choices into word problems. Keep the math out of it and your conversion rate will soar.