Customers think we’re so desperate for business that they won’t buy without a discount.
Prepare for a rant.
For the past two days, I’ve been fielding phone calls from the concierge at one of Phoenix’s big resorts — you know, the kind where people dump hundreds of dollars a night to be pampered at a secluded desert paradise in the middle of the country’s sixth largest city. A guest coming in November wants to take a helicopter tour. We must have gone back and forth about a half dozen times with pricing and tour questions. Apparently, a visit to Flying M Air’s Web site, which has complete information and pricing, was beyond the capabilities of the concierge in question.
On the second to last call, it was determined that the guest wanted a flight in the vicinity of the Salt River and Apache Trail. It’s a good match for Flying M Air’s Salt River Lakes & Canyons Tour, which is about 60-70 minute long and costs $695 for up to three passengers (not each) from Scottsdale Airport. I provided this information and the concierge said she’d get back to me.
She just called again. The client says that there aren’t three people on the flight. There are just two. And they’re willing to spend $495 for the same tour — as if it’s $200 cheaper for me to fly two passengers instead of three.
In other words, they’re trying to haggle my price down.
I told the concierge that would not be possible. She was very understanding and said she already told him that. But I doubt it. I suspect she was trying to help him haggle. (I also suspect that she’d still expect her 10% referral fee on the flight, thus digging even deeper into my pockets.) She apologized and we hung up.
I’ve said it before and I’ll say it again: I am not so desperate for business that I’d be willing to operate my aircraft near or below cost just to take a cheapskate and his wife flying.
But what makes these people think they can get away with bullshit like this?
I suspect that the deep discount mentality fostered by operations like Groupon and its clones has something to do with this. It’s the whole “only idiots pay retail” mindset. It’s the idea that companies have inflated their prices so they can offer discounts.
News flash: All of my clients pay retail. That’s the only pricing I have. Take it or leave it.
And my prices are already among the lowest in the area. My Scottsdale-based competitor would charge more than $1,500 for the same flight. Would Mr. Cheapskate be offering that company $495 for their tour? That company wouldn’t even turn a blade for less than $1,000.
My policy is firm: no discounts, no haggling. My services are priced fairly and I will stand by them.
Besides, I have way better things to do with my time than deal with the kind of client who doesn’t understand the value of what he’s getting for his money.
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I agree 100% with you Maria. I don’t want to sound like a reminiscing “back in my day” kind of curmudgeon, but I remember a time when pricing in aviation was honest, solid, and more than reasonable. Unfortunately, as the information economy grew and the “third party marketing” and “wholesale direct” movement took shape, so began the pricing warfare between service providers and operators. I cringe whenever anyone says “we’ll make it up in incremental sales/volume” because we all know that our market is somewhat fixed and discounting to stay price-competitive with the “guys next door” or even what the customer “thinks” the pricing should be only robs from our bottom line… the line that allows us to grow, or enhance our service offerings. For charter, it’s the brokers or worse-yet, the online brokerage / bidding warehouse where the lowest priced operator wins (and the customer loses, because what kind of QUALITY does the lowest price assure??). For aircraft fuel, it’s the fuel programs of the world… the wholesale middle marketeer who cashes in on the customer side by charging a premium to be part of the program and cashes in on the provider side by requiring low into-plane rates to just add their own percentage on top and make their profit line. There are so many of these programs out there now that the term “Retail Price” for Jet-A is nearly unheard of and almost never what anyone actually pays and on the 100LL side, it’s getting more and more like that (though the 100LL supply side is probably going to limit that in the near future). In the end, charter operators and FBOs are left with scraps of margin and are expected to maintain high-level service standards, hire the best people and pay them appropriately, and operate the safest aircraft in a highly regulated environment! Yeah, I am right there with you on coupons and discounts.
Oh, and finally, we need to take whatever we have held over in margin and set some aside for the expenses to appropriately market and develop the business as well! Luckily savvy business owners like you have found creative ways of getting around the cost of major advertising and marketing efforts, but to many outside of the private aviation industry, we look like a “luxury” service that can afford the high costs of placement in their swanky magazines and directories or place banners on their “exclusive” sites to get in front of the upper echelon audience that would make our “perfect” client base. The problem is, as you so clearly described, even the upper crust clients will haggle and your return on investment from those costly ads or campaigns will get chopped apart before you even leave the ground.
It’s a Friday… I guess I’m in a ranting kind of mood too.
I call them leeches: the third-party marketers who sell your services and make more money than you do. The concierges with their 20% demands were sucking me dry; I cut their rate to 10% and if they don’t like it, they don’t have to work with me. I invested so much of my time and money in my business — what did they invest? Don’t I deserve to make more than they do on each flight?
I don’t discount for anyone anymore — except sometimes my very good repeat clients who are good for 10 or more hours of flight time a season. No one else deserves it.
I own a plant nursery in Michigan, a polar opposite to your business! However, my experience with these deals has not been much different. When I brought up the same numbers you talk about, selling product. 25 cents on the dollar, the rep was ” shocked” that I didn’t understand the 50/50 split of sales. I tried to explain my position of selling in this site would net 25 cents on the dollar minus expenses would equal approx. 18 cents on the dollar. She either could not truly comprehend or knew the truth and pretended to not understand. I did try a local company at a local TV station with some success, mostly because I could limit the number of coupons sold, however mid-contract these people decided to change the agreement to unlimited coupons and when I refused they cancelled my entire advertising contract! All I can say is Good Riddence! I will never put up with an outsider telling ( or demanding) how I will advertise my business. Good for you for alerting business owners to the pitfalls of these sites, whatever their source. Anyone who does contract with them, don’t be surprised when the contract changes on their end even though you are expected to honor your side of the same contract!
Ryan is right. This culture developed from online third-party companies and that was long before Group-on even existed. I won’t use them for the reason he mentioned, the quality not guaranteed. I prefer to deal directly with an airline, hotel, car rental company so if something goes wrong, they will fix it for me. Those third party companies won’t a good portion of the time.
As for people with a lot of extra disposable income like those so prevalent in Scottsdale, it is a myth that they are the generous spenders. Sure, they have more to spend so they do, but they are, as a class, notoriously frugal about what they will spend for services and for their desire to haggle, to get a good deal. That’s how they keep more of their money. Middle-class people are less likely to haggle.
Customers don’t think about you as much as you think they do. They are thinking about their wallets. It isn’t a personal insult of some kind against you. All you have to do is say no.
I know you’re right about this, but it’s hard not to feel insulted when what they’re asking for is a huge discount that would cause you to operate at a loss. It takes more than fuel to operate a helicopter.
I am sorry to disagree, I do not use coupons, groupon, or any of those items, I just believe in negotiating rates that I believe to be high. Items like helicopter rides, cars rentals, even hotel rooms. If you wish to deal with me, fine….if not my money can go elsewhere.
In Fl those “rides” are running less than one hundred dollars, so I would say your rates are high. I would want to get a better rate than you were willing to charge the couple in this post.
That couple may have been like me and felt your rates were high, not coupon groupies.
Lastly, I am an American consumer, and a former business owner. Businesses cannot exist without customers. Your business cannot exist without me, and others like me. Your overall “attitude” in this post I felt was rude, short, a feeling of; “I am superior to you carrion feeding tourists, begone!”
Based on your blog, I would never hire you.
How do you know what kind of “rides” we’re talking about? This isn’t a 5 minute around-the-patch ride. This is an hour-long TOUR. If you can buy that for less than $100, buy it — but you’ll never get it from me. I know what my costs are and $100 doesn’t even cover the cost of fuel.
You are EXACTLY the kind of cheapskate, doesn’t-understand-the-value-of-anything customer I DON’T want. You should be ASHAMED of yourself, trying to haggle with service providers to dig away at their often small profit margins, pushing them just a little closer to insolvency. So glad you’ll never be bothering me! My business exists PERFECTLY without you and your ilk — and I’m sure plenty of others do, too.
Now do us both a favor and don’t bother reading my blog, either. Your next comment, if presented as obnoxiously as this one, will never see the light of day here anyway. To use your own word, “Begone!”
The rides range from thirty minutes to an hour, depending what you wish to see.
As I stated I was a small business owner, I haggled, bartered, dealed, with my guests, my fellow vendors.It is called getting the best value for your money.
Really I am a cheapskate? Do you not haggle over the price of a car?
At a yard sale? Even if you see items for sale in a pawn shop? Do not some people try to to offer discounts if you pay cash even? (A stretch)
I am a fool……no you are a fool, if you tell me you pay full price for everything……including that used car from a SMALL BUSINESS OWNER.
Really? You haggle over everything? Your groceries? Your doctor and prescriptions? Your lawyer? Where do you draw the line? DId you ever have someone you tried to haggle with tell you to take a hike? What did you do then? Tell they you didn’t like their attitude and claim that they “needed” your business to survive? Did they laugh at you as I pretty much did?
And tell me, what makes my services — the services of a highly trained professional conducting a relatively risky business — different from a doctor or lawyer?
I have over $500,000 invested in training and equipment in my business. My insurance alone costs over $15,000 a year. Am I not allowed to recoup my costs? Do I need to take a lifetime to do so by selling to people at cost just so they can “support” me? Do the math — how many $100 helicopter “rides” would it take to bring in $15,000? And how dare you judge me and my business when you obviously know nothing about it?
The rides you’re talking about were likely PER PERSON. Yeah, I can take 3 people for a 30-minute flight for $100/person. Guess what? That’s $600/hour — more than I’m charging. So are my prices really so outrageous? Maybe you should comment on things you have FACTS about.
And what happens when only one person wants to go flying? Am I supposed to do the flight at loss?
As for MY shopping habits, I shop around for the best deal, but I DON’T insult small business owners by haggling. When I buy a car, I get the cost information up front from the Internet and go with the dealer who can come closest to that. A small business’s prices are what they expect to sell their goods/services for. It’s often set by what they need to get for an item. If prices are high and someone is willing to pay, fine. If they’re too high, no one will buy and the company will suffer. If they’re low, more people will buy. It’s basic economic theory. The difference between your method and mine is that I SHOP AROUND for the best deal and you just bug some small business owner to give you the deal you want with the deluded idea that you’re actually HELPING him.
What your two comments here show me is that (1) you’re not the kind of customer I ever want to deal with and (2) you have absolutely no respect for hardworking small business owners.
This conversation is over.
Here is a little story I always try to remember:
One day, two shops across the road form each other noticed that they were selling the exact same widget. This magic little widget that everyone wanted… Lets call them Jack and Sally.
Jack peeked out of his window to see Sally has dropped her price and people on the street were streaming into her shop. “What? She is selling for 5$ less than me, I’d better drop my price to beat her!” So Jack dropped his price, barely making any profit on each sale.
The next morning Jack peeked across the street again, only to notice Sally is down on her price again! “How is she doing this?” So Jack dropped, making a loss but eager to have feet in his little shop. After a few months of this, Jack had to close his door and Sally had a wildly Successful business! One night, drunk in the pub, Jack ran into Sally and asked her. “Sally, how on earth did you manage to sell your widget for such a low price and still make your business a success?” Upon which Sally replied: “I didn’t. I never sold any widgets.”
Of course CVP principles dictate that you need to consider the contribution of your widget to covering fixed cost. Profit is a poor indicator of the financial impact a product, service, department or branch will have on your bottom line. One branch might be running at loss but it would still be better to run it than not have it contribute at all.
Point of the story is this. Maria, you can get upset about clients and Groupon and people not understanding your service. Your job as entrepreneur is simple. First educate, then sell. Create value to clients and they will gladly pay the price. A simple smile, cup of good coffee before the flight or maybe a picture or two while mid air will build memories and give them something to show their friends and family.
I would love to discuss more of this with you, enjoying your views and posts.
Maria – I enjoy your posts, but you’re the same Facebook “friend” that took me to task for a post that I suggested my friends repost. Instead of simply deciding not to, you posted a lengthy diatribe on why it was stupid, how you would never do a thing like that, etc etc. So why not just NOT DO IT and cheerfully agree to disagree?
I can see that the problem isn’t the customers, it’s your attitude. You have all the facts and figures on costs of operation. What you haven’t done is sell Ms. Concierge on why flying with you, at your rate, is such a great value. When you make customers regret dealing with you, your business is doomed.
Finally – I’ve heard the complaint from you and from a former local tour operator that “because I own a helicopter, people think that I have a lot of money!” Well, to buy one, ya do have to have money. We should be forgiven for thinking so, because on a certain level we’re right. Just sayin’.
I’m a blogger. Posting “lengthy diatribes” is what I do. You’re welcome to read them. Or not.
Of course the blame goes on me for not being able to sell the Concierge on the value of flying with me so that the Concierge could become a salesperson on my staff. As if Ms. Concierge actually cares whether she books a flight with me or a Jeep tour with a low-budget operator who pays the same commission. You apparently haven’t worked with many hotels or their staffs. I banged away at about a dozen of them for years and found a new person sitting in that desk in each hotel every season. I saw 20-page full-color glossy brochures designed and printed specifically for concierge staff — at considerable effort and cost — lost or discarded or simply ignored. Brochures designed to put all the information they needed at their fingertips and be used as a selling tool at their desks. But why look at that? Instead, they call me and ask the same stupid questions over and over, often asking me to provide services that I’m not allowed to provide, such as flights over the Grand Canyon, when the marketing materials I provided clearly state what I can and can’t do and why.
And I have news for you: You do not need to have a lot of money to own a helicopter. You need to be willing to take a risk on a business you’re passionate about and take on a lot of debt. (I borrowed more money to buy my helicopter than I borrowed to buy my house and the monthly payments were twice as much.) And work your ass off in another business to pay that debt until your helicopter business can pay for itself. That didn’t happen for me by coddling Concierges in swanky Phoenix and Scottsdale hotels. It happened by building up a client base of repeat clients — not tourists! — who understand the value of my services and don’t need to be sold on them every other week. When I think of the amount of time and money I wasted trying to build relationships with the revolving door of hotel Concierges, it makes me sick.
You mention my attitude and I’ll agree that when it comes to this area of my business it does suck. But it sucks from experience. I didn’t go into my Concierge sales efforts thinking they were the uncaring morons most of them are. I went into it thinking I could build a real business relationship that was mutually beneficial. It took about three years before I realized just how futile my efforts were.
I’m trying hard not to be offended by your comments. I’m trying to remind myself over and over that your statements were made by someone who simply doesn’t know the reality of the situation — someone who hasn’t experienced the trials and repeated failures of dealing with hotel staff. Someone ignorant — and I use that word in its literal sense, not as an insult — to the operations of a helicopter charter company in a highly competitive market like Phoenix.
Three years ago (when this post was published), I blogged about how deep discount coupon deals ruin it for businesses. I did this mostly because I want other businesses to see how their deals set expectations for customers and can hurt them in the long run. My cost of operations are so high and my profit margins are so low that if I paid concierges the 20% commissions they wanted, they’d be netting more per flight than I would. How do you think a deep discount coupon deal will affect my bottom line? How does it really affect the bottom lines of the businesses that offer them?
That’s what this “lengthy diatribe” was all about. I’m sorry you didn’t learn the lesson I was trying to impart to readers.