Maugie: Stop the price wars
For how long can industry survive discounting? Maugie Lyons, head of commercial operations, Royal Horticultural Halls, comments…
We are all more than aware that the fickle economy has everyone scrambling to pull in revenue. But I feel conservatively optimistic about 2010 and I think it’s time, as an industry, to rise above pure price discounting and concentrate on preserving rate integrity.
The pressure on vendors to agree to reduced prices seems more relentless than ever. Too many in the industry are at sixes and sevens with each other– ultimately devaluing what we have to offer. In the scuttle to close deals and secure business, some of this activity has conditioned our clients to believe that asking for something to be discounted or given to them is standard practice. When we lower our pricing levels, it is inevitable that the quality of our inventory will soon follow suit. Clients are asking venues to reduce catering costs or throw in AV or a Brad Pitt look-alike, even after they have signed the contract. It feels too much like bartering for a second-hand car.
What we need to do is deliver substance and focus on diversity, service and greening events. We have overreacted and overcorrected, and at some point or another we may all have been guilty of joining the price war. Though we might try to rationalise our reasons – for this client, for that cause, it is a smart strategic decision – ultimately, we are undermining ourselves and selling short our products and services; the overriding consequence being that clients will undervalue them in turn.
More often than should be the case, emotion triumphs over logical thought. Discounting might be retaliation to a current competitive action, it might be related to a previous encounter, or it might just be based upon wanting to trump a particular competitor. Regardless, this decision isn’t about margins or maths or any other business principle. It is mutually destructive and it doesn’t yield long-term gains.
That’s not to say that discounting doesn’t have its place – it just needs more thought. Every client does not deserve the same discount. Every discounted pound is precious, and once you make a decision to give it, you are well advised to make it count.
It’s the case of the proverbial rabbit down the hole – if we carry on engaging in price wars, there’s no saying where it will end.
