Stop Letting Your Competitors Set Your Prices

When it’s time to review pricing, one of the first questions many pet care business owners ask is:

“What is everyone else charging?”

It’s an understandable place to start.

Knowing what other boarding facilities, daycare programs, groomers, and trainers in your market charge provides useful information. It helps you understand your competitive position and what clients may expect to pay.

But there’s a problem with using competitor pricing as your primary pricing strategy:

You know what your competitors charge. You don’t know whether they’re making money at that price.

And you definitely don’t know whether that price works for your business.

Your Competitors Don’t Have Your Financials

Two pet care businesses located a few miles apart can have completely different cost structures.

One may own its building while another pays significant rent.

One may operate with an experienced, higher-paid team while another relies heavily on entry-level employees.

One may have significant debt from a recent expansion.

Another may have been operating from the same facility for 20 years.

Their service models, staffing ratios, benefits, occupancy, capacity, and financial goals can all be different.

Yet it’s common for an owner to look at three competitors charging around $45 for daycare and conclude:

“Then $45 must be about right.”

Maybe it is.

But competitor pricing hasn’t answered the most important question:

Can your business profitably deliver that service for $45?

Three Ways to Think About Pricing

I encourage pet care business owners to consider three perspectives when setting or adjusting prices.

1. Competitor-Based Pricing: What Is the Market Charging?

Competitor research is valuable.

You should understand where your pricing falls within your local market and how your services compare with the alternatives available to clients.

But competitor pricing should be market intelligence—not your pricing formula.

If five competitors are underpriced, matching them simply makes you the sixth underpriced business.

And if another facility charges significantly more than you do, that doesn’t automatically mean you can—or should—match its rate.

Use competitor information for context, not as the answer.

2. Customer-Value Pricing: What Is the Service Worth to Your Client?

Clients aren’t simply purchasing a night of boarding or a day of daycare.

They’re purchasing trust, convenience, expertise, safety, communication, peace of mind, and confidence in the people caring for an important member of their family.

Businesses that deliver a differentiated experience can often command a higher price.

Consider what makes your service valuable:

• Staff expertise, training and certifications
• Safety and care standards
• Facility quality
• Personalized attention
• Convenience
• Communication with pet parents
• Specialized services
• Your reputation and client experience

Understanding customer value helps you determine where your business can reasonably sit within your market.

But there’s still one piece missing.

Even if clients are willing to pay a certain price, you need to know whether that price produces an acceptable financial return.

That’s where the third pricing approach becomes critical.

3. Cost-Plus-Profit Pricing: What Does Your Business Need to Charge?

This is the foundation I recommend for pricing decisions.

At its simplest:

Cost to Deliver the Service + Desired Profit = Minimum Viable Price

Of course, determining the cost isn’t always simple.

For a pet care business, it may include direct labor, payroll taxes and benefits, supplies, merchant fees, facility costs, administrative support, management, and other operating expenses.

The goal isn’t to assign every penny of expense perfectly.

The goal is to understand your costs well enough to answer a critical financial question:

“At this price, can this service contribute enough to support a healthy, profitable business?”

Start With Your Numbers – Then Look at the Market

The strongest pricing decisions use all three perspectives.

Think of them as answering three different questions:

• Cost + Profit: What do we need to charge?
• Customer Value: What is our service worth?
• Competitors: What does the market look like?

When those three perspectives are reasonably aligned, you can feel much more confident in your pricing.

When they aren’t, that’s where the important leadership decisions begin.

Suppose your analysis shows that you need to charge $52 for daycare to achieve your desired profitability—but most competitors charge $42 to $46.

That doesn’t automatically mean $52 is impossible.

Instead, it creates questions worth investigating.

• Can you clearly demonstrate greater value?
• Are you providing something clients will pay more for?
• Is your service delivery model too expensive?
• Are your staffing ratios efficient?
• Could you restructure the service?

Or is the market telling you that this particular service will never produce the return you expect?

Those are much more valuable questions than simply asking, “Should we charge what everyone else charges?”

Be Careful With the Annual Percentage Increase

There’s another version of competitor-based pricing that can create the same problem.

It’s the automatic annual increase:

“We raise rates 5% every January.”

Regular price increases can be an excellent practice, especially as wages and operating costs increase.

But an automatic percentage increase assumes your starting price was right.

If a service was already underpriced, increasing it 5% doesn’t necessarily solve the problem.

You may simply have a slightly less underpriced service.

That’s why periodic service-level profitability reviews are so important.

Your Pricing Challenge This Week

Return to the core service you selected after the first blog in this series.

This time, write down three numbers or ranges:

1. Your current price
2. The general range your competitors charge
3. The price you believe your business needs to charge based on your costs and desired profit

Don’t worry if you can’t confidently calculate #3 yet.

That uncertainty is useful information.

It may reveal that the real pricing problem isn’t deciding whether to increase rates.

It’s that you don’t yet have the financial data needed to know what your rates should be.

And that’s a problem worth solving.

Because your competitors can tell you what the market is charging.

Only your financials can tell you what your business needs to charge.

Curious how your business compares to industry standards? Our Crystal Clear KPI Scorecard looks at five of the most important financial health metrics for pet care businesses. Share a few key metrics and get insight on your profit improvement opportunities.

Next in the Pricing for Profit series: The pricing metric most pet businesses aren’t tracking—Effective Rate Earned.