|Yes, we collect bills from around the world. Photo by Judy.|
It was a tough winter here in the US, and some companies made a handsome profit because of it. The revolutionary car-on-demand service Uber is one of them. In the middle of the Washington and New York winter, Uber decided to charge customers three and four times the regular rate. This earned the company a lot of bad press, but the company’s CEO defended his pricing policies saying that he needed to use this pricing model to entice more drivers to come out and work, which was a good point. While we don’t agree with Uber’s decision to essentially price-gouge their customers, we do think all of us, as small business owners, should take advantage of price discrimination strategies. Essentially, price discrimination is a strategy that charges customers different prices for a product or service – and even though we love talking about economics, we promise we won’t get into the hard-core economics of it.
When we tell friends and colleagues that all our rates are public on our website, many are surprised. We go on to explain that we think price transparency is a good thing and that we want to save ourselves and our potential customers some time by telling them what to expect. Many colleagues do agree that having rates publically available is a good idea, but they are worried about having different price points for say, translation agencies and direct clients, but it’s perfectly fine to have different rates. In fact, almost every business has them. Let’s look at some other businesses to see how they handle price discrimination. Remember that we are not lawyers (although Judy is married to one), and that this is not legal advice, but rather our experienced-based opinion. Now, let's finally have a look at some examples:
- · Lawyers oftentimes offer lower rates for non-profits, local resident discounts, firefighters (or whichever group they support), etc. We recently hired a lawyer who told us he had a regular rate, a rate for people he considers “total jerks” (he used another term that’s not fit for this blog) and a rate for people he likes. He charged us the latter – at least as far as we know.
- · Restaurants charge you half the price for a glass of Sauvignon Blanc if you drink it at the bar during happy hour. However, if you order the same glass of wine a few feet away at an actual table, it will cost twice as much. Is it fair? Probably not. Is it legal? Absolutely. One of our favorite high-end Vegas steakhouses now offers a Sunday special, which gets you $60 steak for $30 on Sundays. We are happy to report that the steak is exactly the same and just as tasty!
- Travel-related expenses can vary depending on age and even nationality. When we take a train from Salzburg to Vienna with our dad, his fare is half of ours. When Dagy enter Argentina on her Austrian passport, she doen't have to pay for a “visa.” However, if Judy uses her American passport, it’s $150. Flights to Europe are cheaper in March (low season) than July (high season).
- The price of recreational activities can vary widely. Judy recently wanted to play the same round of golf that she played with our dad in February for $65, but the rate had increased to $110 because the weather was nicer. Skiing is always cheaper on Wednesday than on Saturday. These businesses engage in price discrimination to stimulate demand during slower periods.
- Many businesses offer a certain discount to customers who saw their ad on say, a billboard, a magazine or a flyer. They will tell you to bring in the flyer to get 10% off the final bill. Others, such as gyms, have lower prices for women, although they have gotten into some legal trouble because of this practice, as it can be construed as gender discrimination. Our take: men should be happy to have more women at the gym (they usually do put the weights away), but we digress.
So, dear friends and colleagues: while we know this can be a controversial topic, we think you shouldn't be afraid of price discrimination. You get to set your own prices and you can offer different price points for different clients. You wouldn’t be the first business to do so. We would love to hear your thoughts on this!