Price psychology works in mysterious ways.
I was with a group of friends when the conversation turned to movies.
Several began grousing about the fact that ticket prices had crossed the
double-digit barrier in many markets. “Can you imagine that, paying over $10
just to see a movie!” one complained. It wasn’t the first time I’d heard people
gripe about escalating movie prices.
This has always puzzled me. Movies are still a bargain compared with most other
entertainment options. You pay much more to get into most sporting events, live
theater, music concerts and amusement parks, or even to hang out in a bar
unless you’re the type that can nurse a drink for a couple of hours. (Recently,
I took my 5- and 3-year-old granddaughters to see a Ringling Bros. and Barnum
& Bailey Circus. My pockets emptied faster than a dump truck at quitting
time!) So why all the angst when movie theaters jack up their admission price
by a buck or two? The underlying psychology has some lessons forPMreaders who operate service businesses.
One thing to consider is the familiarity factor. Movie fans typically see
multiple films every year and therefore are well aware of what it costs to get
in. When the price goes up, they notice in a way they don’t for the special
night out to see a concert or play that costs many times
Closely related to familiarity is accessibility. Each sporting event is unique
and live theater offers limited engagements, but movies play several times a
day in multiple movie theaters, with popular films hanging around for months.
When they finally shut down, they can be rented or purchased for home viewing
or accessed on premium cable channels. Easy accessibility helps to drive down the
price people are willing to pay to view even a blockbuster
Moreover, people are conditioned by long tradition to look at movies as cheap
entertainment. The movie industry came into its own during the Great
Depression, when the public had very little money to spend on amusements. Folks
of my generation recall 1950s childhoods when we were able to see two or even
three movies for a quarter at neighborhood theaters. Theater owners long ago
did away with double and triple features, which was a form of price escalation
more palatable to the public than a sudden doubling or tripling of admission
Sales experts always drum home the importance of selling value, but the value
equation gets tricky in this context. Movie fans get just as much value out of
that experience as theater, concert and ballgame patrons do from those costlier
forms of entertainment. Value is in the mind of the beholder and does not
necessarily correlate with price.
So, how does all this translate to your service businesses?
Sticker shock is a fact of life for most PHC service firms, especially the
flat-raters. The more familiar the job, the more customers are apt to complain.
That’s why some of the most astute flat-rate companies strive to maintain
reasonably competitive rates for repetitive work such as annual clean-and-check
inspections and drain cleaning. Instead, they apply all overhead to more
complex, less familiar projects, such as fixture change-outs and water heater
Accessibility reduces their room to maneuver, of course. People have ready
access to numerous companies offering PHC services. All they need to do is pick
up a Yellow Pages directory or, increasingly, do a Google search. Most of them
by long tradition have conditioned the public to expect prices that are dirt
cheap from our industry’s perspective - although, perversely, the public
at-large thinks even the cheapest plumbers charge too much. The value equation
is skewed to the low end of the market.
The most astute companies strive to change the value perception by showing up
in clean, well-stocked service vehicles, with service techs dressed in tidy
uniforms and trained in the niceties of customer service. It boosts the value
perception and is a must if they are to differentiate themselves from the pack
that sets the “going rate” for PHC services in any given market. (Certain movie
theaters have gone a similar route by charging premium prices, typically
$20-$25, for viewings in facilities with cushy chairs and other
Some moviegoers will continue to complain about rising ticket prices. But if
they like the flick, they’ll tell everyone they know to see the picture and
never mention what it cost.
Same with your services.