Pricing Fuck Ups. Lessons on taking the wrong approach to price. Ep01: Huaca-fuckin-china

Lima, 2009. An international house started making a weekend trip per semester for exchange students to an oasis (Huacachina) near Lima as a way to welcome them into the country. They made it quite exclusive (as in sort of invite-only), and people had fun. BUT they were over-paying for what they got: shared rooms with 6+ people, small location, a very “artisanal” approach, made “by friends”. They didn’t know they could have better. They were, in some sorts, knowledge hostages of what was available. They had no real choice.

We (a couple of friends and I) spotted the voids and found there was something that could make a difference, a better way: to level up quality (rooms, activities, drinks, accommodation options), bring a pro approach, a way to feel that it was worth it. We didn’t leave it as just “another trip”. We called it Huaca-fuckin’-china.

We saw a win-win: they all had fun (us too) and we got paid for it.

The Wrong Approach

To compete on price. We cut down the price (sacrificing profits) to make it “more” attractive hoping we’d be able to charge more next time [right…]. We were focused on what the others did. We played their game. Ended up spoiling the market and making it unprofitable. We taught them to spend less and turned them into be driven by the lowest price. We gave our power away. Won the race to zero.

What would’ve done different if starting again

Focus on the outcome (in this case: THE weekend to meet new people and have a blast). To reframe the game in our favor. Take the competition price as ‘yeah. It’s fine. But for this extra, you can have so much more’.
I’d change the focus towards my customers, not my competition. To price premium. The market didn’t have a money problem (they spent 10X more on different trips). To not think with our pockets and focus on what the market values.

What didn’t happen

Made a profit. We did (barely) break even. Had tons of fun, sure, but couldn’t turn it into a sustainable model.

What did happen

Always competed on price, made each trip better than the previous one and unsustainable in the long run, we got ‘meh’ about it, felt like too much effort for no reward. Burn out.

Pricing Lesson

Think of price and things from your client’s side of the table, not yours. You won’t be able to turn them from price-driven into value-driven.

Read this post and more on my Typeshare Social Blog

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