Welcome to the (Pricing) Jungle

I was joining a jungle trekking trip in a remote part of Indonesia, and I found the guides have a weird way in in their pricing. In this industry the common approaches are charging on a fixed amount on per package or on hourly basis, but the norm there is different. They are charging by the number of people joining the trip.

So typically you would be charged, let’s say $100 for a half day trip, for a maximum of four people per group (considering the limitation on car size, and so on), but in this case we were charged $25 per person. You may be thinking, “yeah, but four person times $25 brings you to the same $100, what’s the big deal?”

The concept of value is elusive to many.

Fair trade or impaired trade? 

The guides (the service provider) may claim that this is for the sake of fairness. “People who like to go should pay for their participation, and people who don’t really like to go for the trip may skip it and pay nothing.” Sounds good, but to be really fair, the additional cost and effort for each additional participant are marginally incremental. There is very little differences between bringing one person to the trip or four. I checked around and found many prospects and customers disliked this pricing method because they feel being milked. No one like having their wallet squeezed and customers (people like you in this case) are not stupid. At least not stupid enough to work out simple mathematical calculation. 

While the guides are intending to maximize profit by charging per participant, they are sacrificing the comfort of guaranteed fixed income had they charge on per package basis. The benefits of variable income also expose them to the risk of variable incomes (hey, high rewards, high risk). If there are less people joining the trip. People usually go in a pair or in a small group, and they would go for the trip even though they are not super interested in it “because it’s the same price and they are already there anyway”. So by charging on per person basis, you are giving a leeway for your indirect customers to skip paying you. This will work out nicely if the guide’s break-even point is around $25, which, from my quick estimate, seems to be the case in the region. Maybe they are not stupid, just like their customers.

The other argument that was given by the guide is “the more people joining their trip, the bigger their responsibilities" Who are they kidding? Quantitatively, there is no way that he can split his attention to all of the participants equally, so the more people joining, the less we should pay for each participant. Qualitatively, the guide would pay more attention to participants that he finds more attractive (he tries to impress them bla bla bla), so unattractive people should be paying less (this ‘Ugly Face Discount’ must catch on). I can bet on my life that if we encounter a bear, the guide will not give out his life for mine. He would probably shoot me in my legs to buy him time to run away. Don’t talk about responsibility irresponsibly.

The fairer pricing model: by performance and conducts 

Setting price by performance is always the ideal case, whenever it can be quantifiable. If you are selling a machine that has an output rate of 5,000 units/hour, while your competitor’s output rate is 4,000 units/hour, it is fair to charge your competitor more (and you should). In the jungle trip business, the output is ‘the number of different wildlife encounter spotted’. This way, good guides who can trace and spot the exotic animals and plants will earn more than lousy guides, and customers who have less wildlife encounters will pay less than customers who got more.

To make the perfect pricing method, the element of ‘Conducts’ needs to be added. Conduct is an important element to control the human behavior. If there is no consideration on conducts on the guides, very soon you would have the guides littering in the forest, abusing the animals, or ruining your trip by ranting his personal financial problems to you. Similarly, if your machine can produce more, but it significantly consumes more resources and significantly pollutes more, no one should buy it at the same price with the machine that produce less units per hour but consume less resources (in fact, you shouldn’t sell your products at all).

The guides may argue that his may be fair for the customer, but it is not fair for them because there are things that are beyond their control. Sure, that is called the element of ‘luck’, and it works for them as much as against them, so suck it. Hey the customer is king <xxx link>. If it helps, you could have a super minimum basic rate to cover the basic needs, you know, on the basis of fairness.

The Norm and Opportunities in the Market 

The above imperfect pricing structure happened simply “because it’s the norm”. We have a lot of monopolistic markets after all. But once in a while, you may have someone who dare to innovate and use different pricing structure altogether (yes, pricing can be an innovation). We probably will not have the ideal pricing based on purely performance and conducts, but we could skip this unfair monopolistic pricing in the long run. 

To take this further, you could have an online portal listing all the guides and their reviews, so that customers would have better transparency. This way fairness will be served to the guides too. 

The market is full of opportunities as always, it’s up to you whether you want to take it.