“Setting the pricing structure at your community is a nuanced process, and it shouldn’t be done haphazardly,” says Malissa Illiano, Senior Consultant & Director of Market Research at SageAge Strategies. “One way to create a smart pricing structure is by examining competitive pricing strategies.”
Randomly picking a number that sounds right is a dangerous approach. However, many communities don’t do much research when it comes to setting their pricing structures, so they are, in effect, being pretty random! Instead, using competitive pricing strategies to find that sweet spot that really fits your community won’t leave your prospective residents reeling.
What Is Competitive Pricing?
At its most basic level, competitive pricing is setting the price of your service, product or offering based on what your competition is charging for comparable things. This type of pricing usually happens in localities where something – in this case, senior living – has been around for a while, and the pricing levels have reached a certain stable equilibrium due to there being several options for the same product.
When engaging in a competitive pricing strategy, a business generally has three different options. They can price lower than the competition, higher than the competition or equal to the competition. A business may set their price lower than the market rate if they wish to draw customers from their competitors and are willing to take a loss with the hopes that other services or offerings will make up the difference. A business that sets its pricing higher than the competition most often feels it has something unique – a differentiator, or several – to offer potential customers that justifies the higher price point.
It may go without saying, but the key to smart competitive pricing is to know your competition. Without knowing what your competition charges for comparable offerings, you can’t make a smart decision about what the market may or may not support at your community. Communities very often have pricing information on their websites, but some prefer to discuss such details in person. In that sort of circumstance, mystery shopping your competition can be a good way to get the inside scoop on not just their basic rental rates, but also how much they charge for add-ons, other services, special offerings and the like. You can also get a feel for how flexible they are and what specials or promotions they offer to certain customers.
How to Use Competitive Pricing Strategies to Your Advantage
Setting your pricing above, at or below your competition isn’t something you should decide on lightly, and it’s not a one-size-fits-all decision, either. Your pricing structure can be flexible and shift according to market needs, new offerings and other changes. Here are some suggestions for how you might consider structuring your pricing matrix, based on your business’s unique attributes and needs.
Consider pricing lower if you are new to the market or if your product is no longer as competitive as it once was.
Low introductory prices can entice buyers who may be wary of a new, unknown competitor that’s come to the market. It can be a way to fill your roster, but be careful; it can set a precedent that you are a “bargain” community, which may be what you’re going for, but also may not be!
Similarly, lower prices can entice buyers who don’t necessarily need to have or want the newest, shiniest offering in the market. If your units are smaller than a majority of your competitors, if your community amenities and/or services are lacking or if your community is truly in need of a facelift, you may want to consider adjusting prices to fall just slightly lower than market averages.
Consider pricing higher if you offer a luxury product – whether new or established – and want to be seen as such.
Perhaps you are the only community in your geographic area to offer a certain higher level of living. If no one else in your market offers the services you offer (assuming you did your research and know there’s a market for it), you are in the unique position of setting the market rate. You will have a narrower customer base to draw from, but if you are successful in drawing qualified leads, your higher sales will make up for it.
Meeting your customers where they are is important in the senior living industry. That’s not to say you have to lower your prices to meet every potential customer’s need, but being willing to be flexible can be a great way to secure a customer who might otherwise go elsewhere. Having a solid customer persona and method for determining what leads are highly qualified is critical. There’s a huge difference between offering a special promotion to a potential customer who has the long-term capabilities to meet a higher price point, and offering a sale to someone who simply will not be able to support themselves living at your community six months from now. It’s in instances like this that knowing your customer is key.
Whether you’re new to the game or a long-time player, examining your pricing strategy is a smart thing to do regularly to ensure you’re priced at a point that won’t give your customers the aforementioned sticker shock, while also not undervaluing your product.
SageAge Strategies is a multiple award-winning, strategic growth and marketing organization that can provide pricing insight expertise for your community. For more information, please call or e-mail Malissa Illiano at 717-695-6740 / firstname.lastname@example.org.