Last week’s episode of The Apprentice saw the two teams challenged to set up and run their own laundry business for 24 hours. Both teams had to go out and tout for business, wash and press the laundry to a high standard, and return all the correct items to their owners within the specified time limit. As usual, there were all sorts of mistakes made along the way which would serve as a warning to anyone in the world of business. But from a market research point of view, what was the lesson we can take from this week’s exercise?
Without any previous experience in the laundry trade, one of the keys to winning business in this task was getting the pricing structure right. The boys’ team wisely did their research straight away, ringing round several competitors to get a feel for the industry’s charging structure, and reaping the benefits immediately by winning a big hotel contract. Whilst the manager of the hotel in question had been expecting a quote in the region of £200, the girls’ team left him speechless by pricing its services at £5,000! This followed a conversation between the girls during which they all admitted that they had no idea what to charge, and so proceeded to pluck a figure of £4.99 per item out of the air. Why no-one showed even the slightest initiative in suggesting the need to research what pricing structure should be chosen, is beyond the comprehension of most people.
You might have hoped that, upon learning how staggeringly expensive their quote had been, the girls’ team would decide to do some pricing research, yet they carried on regardless. At their next appointment, they offered to wash a huge amount of filthy industrial workwear at the bargain basement price of £15. Even the customer could hardly contain his disbelief and amusement at the ridiculously low price. Needless to say, the boys’ team strolled to victory in this task.
Week One’s episode also demonstrated a lack of nous when it came to product pricing. In setting up competing fish stalls in a market, the girls’ team started to make losses from the word go. Before they had even had time to price up their stock, they were approached by customers wishing to purchase their wares. Desperate to get the ball rolling and some sales under their belts, some team members just asked the customers what they would be willing to pay for their produce. It doesn’t take a genius to work out that these early customers probably landed themselves some unbelievable bargains! The boys’ team, meanwhile, in its rush to get set up, mistakenly began selling lobster at £4.90 each (instead of a more realistic price of £4.90 per kilo). In their defence, it didn’t take the boys too long to head off to check out the prices offered by their competitors and to correct their mistake, but to some extent the damage was already done.
Pricing is never easy to get right, but the very last thing you should do is guess. Pricing research is vital in establishing what the market can bear, what pricing strategies your competitors have adopted and why, what quality perceptions a particular pricing structure will give, etc.