Underpricing the competition vs. actually surviving vs. charging a fair price

[Wookie]

You may have a copy of mine, but it's mainly used for oil companies and researchers, but you are welcome to it. I got it from the University of California charter vessel site and made it fit my own needs.

 

[grouchyturtle]

Thanks! It's at least a good starting point. And they probably get it from somewhere else, and recycled it themselves.

 

[markmud]

Hey Grouchy Turtle,

I would approach this as a business decision.

1) formulate a goal for your business.
2) formulate a strategy for your business.
3) formulate tactics that use your strategy to accomplish your goal.

A major part of business planning is risk analysis and risk assessment. Assess all possible risks. Assign a range of risk, expressed as a factor or percentage, for all risks detailed in your risk analysis.

Having a theme for your businesss is a critical part of creating your goal. Finding a niche that seperates your organization from all of the other dive operators is critical. Also, come up with a theme for each day of diving.

A thought:

Day 1) orientation day, skill evaluation followed by a JPS (joint planning session) with crew and guests--offer dive suggestions relative to the skill levels of the guest such as:
Day 2) Lionfish hunting, or some other Earth freindly activity.
Day 3) Go to a dive site not used by local dive operators. Hunt for dinner. A couple of lobsters for dinner's horsey dueverrs.
Day 4) Wreck diving
Day 5) Cert day. have the guest choose a cert course that they are interested in and help them get certed.

Have a theme for each evenings dinner and alcohol service (limit the alcohol served by rule).

Next, create an XL spreadsheet with formulas. Input all expenses associated with the operation. Assign formulas to cover risk assessment. Add your overhead expense. Add your marketing plan budget with commissions for sales people. Add your net profit margin that is calculated by your overall operational risk assessment. Add your executive contingency allowance. Add your operational contingency allowance.

Total-up the business plan and divide by the number of expected customers. That is what you charge for your service. If the price is too high, then you should not go into business. If the price is too low, raise your per-person charge as you have forgotten something.

markm

 

[Tortuga James]

Old thread, but I will put my 2 cents worth in, especially since I have the benefit of data from this past season. I wouldn't worry too much about what other operators charge other than as a guideline for what the market will bear.

"Undercutting" as I see it is charging less than market value to get customers and taking a less than optimal profit for your services. That practice rarely ever yields positive results, it harms the other operators and sets a price point for you that you will never overcome with the customers you discount to. Nobody wins. Now if you set your pricing at a place that gives you the revenue to operate sucessfully and it is lower than the other operators, then that is not undercutting. It is filling a market void. Maybe you can do it because you go slower and burn less fuel, or offer less valued added services. But you will pick up divers who are price sensitive and willing to take less for a lower price.

My father was in retail sales, and always said "Your sale customers are just as important as your full price customers because they help you clear the inventory the full price customers wouldn't buy." Great advice. I sometimes discount on Mondays and Tuesdays, they are my most difficult days to sell.

My per seat pricing is 20% higher than the bigger operations in my market. I stayed booked solid every weekend all season, and I am booked until the very last weekend which is end of November. My boat is smaller and has less amenities but my value add is that I offer custom services. I have built a reputation for being accomodating and getting people to the sites they want to dive. I have weeded out the newer, less experienced "resort" divers and cater to advanced, seasoned NC divers. I am thinking about going up another 10% next season. I only want the customers that are willing to pay up not to have to dive on a crew boat. I don't get any push back about what I charge, although I am sure some steer away from my higher prices. But until I start seeing my bookings fall, I am going to ask for as much as I can, because that is what the market will bear. Same goes with my tank rentals and fills. I am 25% higher than the other fill options in town, but I take the tanks from the boat and bring them back in the morning. My customers are welcome to haul their tanks off to save $5 on a fill if they want to.

In a nutshell, my point is that underpricing your competition as a strategy is not wise. Find what the market will bear for the services you offer and compare that to what it costs you to operate and that is where you should set your pricing.

 

[markmud]

Old thread, but I will put my 2 cents worth in, especially since I have the benefit of data from this past season. I wouldn't worry too much about what other operators charge other than as a guideline for what the market will bear.

"Undercutting" as I see it is charging less than market value to get customers and taking a less than optimal profit for your services. That practice rarely ever yields positive results, it harms the other operators and sets a price point for you that you will never overcome with the customers you discount to. Nobody wins. Now if you set your pricing at a place that gives you the revenue to operate sucessfully and it is lower than the other operators, then that is not undercutting. It is filling a market void. Maybe you can do it because you go slower and burn less fuel, or offer less valued added services. But you will pick up divers who are price sensitive and willing to take less for a lower price.

My father was in retail sales, and always said "Your sale customers are just as important as your full price customers because they help you clear the inventory the full price customers wouldn't buy." Great advice. I sometimes discount on Mondays and Tuesdays, they are my most difficult days to sell.

My per seat pricing is 20% higher than the bigger operations in my market. I stayed booked solid every weekend all season, and I am booked until the very last weekend which is end of November. My boat is smaller and has less amenities but my value add is that I offer custom services. I have built a reputation for being accomodating and getting people to the sites they want to dive. I have weeded out the newer, less experienced "resort" divers and cater to advanced, seasoned NC divers. I am thinking about going up another 10% next season. I only want the customers that are willing to pay up not to have to dive on a crew boat. I don't get any push back about what I charge, although I am sure some steer away from my higher prices. But until I start seeing my bookings fall, I am going to ask for as much as I can, because that is what the market will bear. Same goes with my tank rentals and fills. I am 25% higher than the other fill options in town, but I take the tanks from the boat and bring them back in the morning. My customers are welcome to haul their tanks off to save $5 on a fill if they want to.

In a nutshell, my point is that underpricing your competition as a strategy is not wise. Find what the market will bear for the services you offer and compare that to what it costs you to operate and that is where you should set your pricing.

Hey Tortuga James,

I get the feeling that you are finding a niche market for yourself. I like your thought process on this issue.

I like dive operations that are flexible with dive planning. I also like the SoCal (west coast) dive operators who take the "cattle" to a dive site, open the bullwork gate, and say dive! No dive master. We just go diving by ourselves.

markm

 

[grouchyturtle]

Thanks for all of the suggestions guys!

I've also had someone tell me you need to factor in age, size, and overall condition of the boat, when estimating what you should charge. I don't really think this is the case with diving, or at least it's not weighted as much, but I'm not doing dive charters. In fact I can't find a charter broker who will work with me, because I'm too small and my boat is too old. They don't want anything more than 10 years old, and nothing less than around 40', even with catamarans.

 

[Reef Pirate]

Here is my shiny nickel for what it is worth. I run private trips, no more then 4 people per boat diving, not more than 6 when sightseeing. I, like Tortuga said, have decided that if I cater to the crowd that despises being stuck on a boat diving with "resort" divers, or feeling like they are on a cattle car I have multiple return trips. I have gotten tips from people that I have taken out on back to back days! My best tip came from a family that had, in my opinion a horrible day on the water as far as diving and fishing went. I did however make sure that they had all the little extra things that often get overlooked on a bigger boat. I charge more, but I provide more.

I started out by working with two shops in the local area only. To this day I do the same thing, I have stayed loyal to my marina and try and do what I can to promote both as much as possible.

 

[grouchyturtle]

Ok, next topic advertising!
Specifically Adwords.

Have any of you run a campaign on Google?
How did it...or is it still working out for you?

 

[Wookie]

Been there, did that.

What I found was that Google pushed up your bid price so that I was getting many impressions, but one or 2 clicks per day were costing me 5 bucks. Then I discovered that google was putting me in in inappropriate places, and my click-throughs were coming from searches like "dive bars" and Spanish searches for turtles. Spending as much as $600/month got me no business as far as I could tell.....

 

[grouchyturtle]

Were you using broad keywords or more specific terms? For example simply using the word dive or diving could likely produce results like you've described. From what I've heard you want to use more specific terms for better targeting, such as "Florida Keys diving" "Key West dive charters" etc.

I hear what you're saying, though. I'm debating running a google campaign, but I've already run a few facebook campaigns with similar results. I didn't spend nearly what you did, but my page is approaching 1000 fans, yet not a single trip booked from even one of them.

I also paid for a listing on this big kiosk thing which also included a free listing on ettractions. Same thing, I think, since I don't have direct access to it. They claim that I'm getting 1000s of clicks, yet not even a phone call.

I'm trying to decide where to spend the money that I don't have at this point, because so far nothing I've tried has worked. A few trips from Yelp, a few from Craigslist, and a few from people who saw my cards locally, and that's about it.