$7.50 (tax not included) or $8.00/$8.25 (tax included)

[CardSharpCook]

My friend and I are opening a mini-golf course here in Vegas and have run into a disagreement about pricing. Do we include tax in the posted price? The desired pricing is $7.50 for kids, $8.50 for adults. Having it as such means that with Nevada's 7.75% sales tax, Kids are actually $8.08 and adults $9.16

Arguments for including tax:
-Looks professional.
-Don't have to keep, and deal with, large amounts of small change.
-If we go with $8.25/$9.25 we'll make an extra $6900 per year.
-Most entertainment options charge in whole dollar(whole quarter) amounts - Movies are $9.25 tax included, museums, baseball games, etc.
-Charging tax on top and giving people .92c change would, in the words of a gambling friend, "cause massive tilt."

Arguments for not including tax.
-The perceived cost is $7.50, not $8.08. People remember the number the saw, $7.50, and not the number the paid, $8.08
-If we were to go with $8/$9 (instead of $8.25/$9.25) we'd make an extra $6500 per year by not including the tax in the price.
-People now have change in their pockets for use in our video games and vending machines. (obv, if we were to charge 8.25, this would also be true)
-The increase in perceived cost would cause a loss of business.
-There is a theory of marketing that says that value is perceived in odd numbers, luxury in even numbers (observe car pricing).
-People assume you're going to charge them tax anyway.

summary of profits assuming change in price does not effect # of customers:
$7.50/$8.50 (tax not included) = Base + $6500
$8/$9 (tax included) = Base
$8.25/$.9.25 = Base + $13,400

The crux of the question is, How will adjustments in pricing effect our bottom line. Which pricing plan will create the most business and generate the most profit. I'm having quite a contentious argument with my business partner, so I'd really love some outside input.

[gobboboy]

Most people don't drive by some miniputt place, look at the price and say "holy crap that's such a good value we can't pass that up." They plan out that they're gonna go to play miniputt. I don't think they would then care about the extra dollar. Go with tax included.

[CardSharpCook]

But once they come in, play a round, are they going to come back? Are they going to tell their friends, "but it was too expensive..."

[traz]

No mini-golf players give a crap between listed prices of $8.50 and $9.25 .

There's no real psychological issue here, because they won't be comparing it to anything. All they'll know is the mini-golf game costs $9.25. It's not like someone will see that and say "geez, if this was listed as $8.50 I'd play, but not when it's $9.25"

Go with tax included

[DLizzle]

[ QUOTE ]
But once they come in, play a round, are they going to come back? Are they going to tell their friends, "but it was too expensive..."

[/ QUOTE ]

no, but they will comment on the full pocket of change they have if you have to give them back $0.91.

Also, if your mini-golf course is good enough people won't care about the price much unless it is outrageous or way over the competitors' prices. Even then, if the course is really cool, people will still come. People will pay for quality entertainment, and though I don't know for sure, I'd imagine this fact is enhanced in the area you are in.

[Runkmud]

As an ex-concession carts owner who has experienced selling massive amounts of low priced items in volume, you've thought of most of the pros and cons.

Might I add one that might sway you. If you and your partner don't intend to run the register yourself, adding tax after the price makes it tougher for young would be thieves to pocket money without an inventory system in place.

example: If the price is $7.50 per child, two children are $15, very easy to steal. Where as if two children is 16.16 a bit harder to scam the money.

If your register person is determined to steal, they'll find a way, don't go out of your way to make it easier on them. Especially in a place like a mini-golf where there's no real inventory system in place.


Good luck with your new venture. [img]/images/graemlins/smile.gif[/img]

[CardSharpCook]

Inventory check is problematic only when the register person allows friends to golf for free, and they bring their own balls. Remember, at the end of the round, the 18th hole eats your ball. That becomes the counter to which the register should match. Of course, theft of balls will happen, and this will mean that there will naturally be MORE money in the register than balls in the drop box. This can be partially remedied by knowing how many balls we are giving out. We don't constantly refill the ball despensor, we do so in batches of 40 balls. We then also know how many balls we are giving out, how many we are losing per day... But that's a tangent....

[El Diablo]

CSC,

What do competitors in your area do?

If they DON'T include tax, then don't include tax. You don't want to look like you're higher priced.

If they DO include tax, then you can decide to either include tax or NOT include tax and appear cheaper.

Does that make sense?

[GTL]

the fact that you are opening a mini golf course in vegas and you don't know whether or not the other one in town includes tax in their advertised price is weird to me. go to the other one, play a round.

also, i think the deciding factor should be which makes you more money. i don't think customers are going to be pissed because they are used to one way and you are doing it the other. with that in mind, i would probably go for the adding the tax at the register method.

edit - just read diablo's post and i agree with it. his recomendation is also designed to maximize your profits.

[Runkmud]

[ QUOTE ]
Inventory check is problematic only when the register person allows friends to golf for free, and they bring their own balls. Remember, at the end of the round, the 18th hole eats your ball. That becomes the counter to which the register should match. Of course, theft of balls will happen, and this will mean that there will naturally be MORE money in the register than balls in the drop box. This can be partially remedied by knowing how many balls we are giving out. We don't constantly refill the ball despensor, we do so in batches of 40 balls. We then also know how many balls we are giving out, how many we are losing per day... But that's a tangent....

[/ QUOTE ]

While I appreciate that you have an inventory control system in place, don't underestimate the stupidity of young minimum wage employees.

I'm not going into all the retarded stories of teens stealing money from me, but over the course of seven years and multiple carts, it happened well over a thousand times. I'm not sure that you want to go into the depth of a camera system and advanced security, but certainly don't make it easy on them.

IMHO.