There is so much knowledge and information that we all take for granted but is not available to most small businesses. Here is a snippet of conversation I had with a person who is planning to start her own acupuncture clinic.
Q:How big do you think the market is?
A: What do you mean? I do not know. I work now in university clinic and I see 10-12 people a day. There are a lots of people out there. If I can get those 10-12 people to come see me in my clinic, I will be profitable.
Q: Why 10-12 people?
A: After rent and other things, that is what I need to live at the same level as my current job.
Q: How will you get 10-12 people a day?
A: The university clinic gets it, I think I can get it too.
Q: What kind of customers seek acupuncture?
A: I usually see people who have not found a cure with any other method. By the time they come to the clinic they are really sick.
Q: What do you think these customers can afford?
A: How can I tell? They seem worn down, that is why they come to university clinic.
Q: What will you charge for the service?
A: Price is not a decision for me. Everyone in this area charges $40. So I do not have to worry about coming up with my own. I will charge the same.
Q: Why is that?
A: When everyone is charging one price, the customer comes in with that price in their mind (she intuitively gets Reference price). So I cannot fight it. They are going to say, “you are new and why are you charging more”.
Q:Would you consider setting 3 different prices for slightly different types of services and see what your customers will pick? Just for a short time at least?
A: How can I charge different customers differently? That is not correct. If I am not spending more time, effort or materials I cannot charge different prices. It makes no sense to tell customers I have $40, $50, $60 services, you pick which one you like.
Q:Why is it wrong to charge some customers more even if you do not have costs? You should set your price based on your customer not your costs.
A: Customers already know what to pay. I cannot charge lot more than my rent, time and materials.
That is one anecdote, take it for what it is worth.