Raising prices to offset the cost of hosting.

xandriarain

I am currently looking for a place to host clients and I’m trying to figure out how to offset my cost of hosting since I will be having to pay rent, buy furniture, decorations , constantly clean the place, change sheets and do laundry. I am stuck between the idea of increasing my hourly rate across-the-board or charging a separate hosting fee. If I increase my rates I will no longer charge clients separately for gas and tolls and my pricing would be all inclusive but for those clients who still want to host me and live local they are not getting any benefit since I would hardly have any cost of gas and tolls to begin with, they would just be paying more money. If I charge a separate hosting fee some clients may think I am nickel and diming them. I want to be sensitive to the fact that there is a pandemic and the economy is terrible right now but I also want to make sure that I’m not hurting myself and cutting into my income by having a hosting space. I want to do this in a way that is fair and reasonable for everyone. I would love ideas and feedback both from other pros and from clients.

FWIW, here are my general thoughts about pricing:

• as a first-time client, I want pricing to be simple and don't want long-winded explanations of why you charge what you charge. If you want to charge more for hosting, that's fine. But some cuddlers go into detail about how they have to pay for gas or utilities or laundry or whatever to justify their fees... every business has expenses. You don't need to itemize them to your clients.

• I personally tend to be more reluctant with prices over $100/hr. I don't think I've ever been a repeat client of someone who charged over $100. It's not that I couldn't afford it if I had to, but given that I can find great options in the $80-$100 range (I've never noticed any correlation between quality of cuddle and price), I don't see why I'd want to spend more.

xandriarain

@CuddleMeLater I appreciate your feedback. My concern is while Covid it is still going on I will not get enough additional clients to offset the cost of having a space. If you look closely at my profile I have $100 fee for the first two hours and then each additional hour is 50 so if I even charged an extra 40 for hosting it would come out to about 290 for three hours and it would just get lower by the hour is the session went on. But my business is more geared towards longer sessions.
But that is one of my concerns is that the sticker shock of 120 an hour my turn people off to the point where they don’t even look at my multi hour discounts. But it sounds like if I don’t eat the cost of my hosting space and charge for offering a space to have sessions I’m going to turn off customers no matter how I go about it. The question is do I lose more by eating the cost or by raising my prices and turning off a few clients?

cuddlerforu24

@xandrian why not start out hosting in your own space ? Why pay rent on an additional apartment - room somewhere- when you can use your own ? This way you can use existing furniture , your own decorations , and when you say constantly clean the place you pretty much constantly clean your own space I hope . Perhaps there’s a small investment of some extra sheets if you don’t want to use your bedroom you can get a sleep sofa for your living room .
Now if you have a spare bedroom that you can claim to the IRS that it is dedicated for business use an accountant can help you with a depreciation expense that you can deduct somehow . ( are they really going to come out and audit you on that ? No) also , anything you purchase for that “ room” AND the maintenance with that room is tax deductible somehow . I would consider home at first until your business gets going strongly especially with the pandemic .

Yeah I see the dilemma. I don't have enough experience in the market to know the answer.

Personally I would probably just charge $100/hour, forget the hosting fee, and reduce the multi-hour discount, so that maybe each additional hour after 2 is $80 instead of $50.

Here's my justification: What are your reasons for setting up a cuddling space? Presumably some combination of: it's more convenient for you than where you live or being a guest at someone else's place, or you feel you could fit in more clients if you didn't have to travel to them, or you feel it would give you a competitive advantage over other cuddlers who can't host.

Whatever your reasons are, you presumably want clients to come to your new space. If you set up your new space, you're going to be paying the overhead for that space whether clients come there or not. So why would you charge your clients more for doing what you would actually prefer them to do?

I can say I personally have been turned off by hosting fees in the past. (Some people actually have a hosting fee and a travel fee -- even for very short distance travel... Yes, that absolutely makes the client feel nickel-and-dimed.)

But, like I said, I am not an expert in this market. For all I know, maybe there are tons of clients who would happily pay extra for a cuddler who can host in a private space.

CuddleDuncan

One thing I don't think I've ever seen mentioned on Cuddle Comfort is the use of therapy rooms. Which is odd because that is how I first met Pro cuddling.

I've been to a number of therapy rooms with a number of therapists. Links below in case anybody's interested in seeing the kind of thing I'm talking about. sometimes the facilities provided are adequate for cudding, sometimes the pro has brought some additional rugs or something. We tend to end up on the floor. It's always worked very well.

One unusual place is Pop&Rest. It's meant to be a snoozing facility in town. Their pods are like garden sheds set up in a big room, and they are perfectly comfortable: bed, little bedside table with lamp, and that's about it. They would be idea for a wee snooze in the middle of the working day, and they work fine for cuddling although they feel a little cramped and hot. Nordic Cuddle have a deal with them - normally (for obvious reasons) they do not allow two people into their pods.

https://popnrest.com/oldstreet

https://www.brighterspacesuk.com/locations/islington/

http://www.hampsteadheaththerapyrooms.co.uk/

CuddleDuncan

So let me see if I've got this straight. You want to set up a hosting facility, and then offer clients a discount if they don't use it?

Professionals (not just cuddling, in general) have a choice. You can have the hassle and time-penalty of travelling to the client: or the expense of providing facilities. In the grand scheme of things the two cost about the same, although of course it varies a lot depending on the precise circumstances.

You have not really told us why you are considering this. If it's essentially a personal decision, then you wouldn't charge extra for hosting. The idea is that you take a hit on the income in order to gain whatever benefits you expect to gain.

If it's essentially a business decision then the obvious thing to do is offer a discount (at least at first) for clients who use the hosting facility. What you want is for all clients to come there, so you get the best value from the facilities.

Of course it's complicated. The actual number of cuddles you can do per day is not limited by time, it's limited by your capacity to cuddle.

Remember, the fixed cost of creating a product is not a factor in deciding the price of the product. The customer does not care how much it cost you: it is irrelevant. You have to figure out the cost, and how much you can sell it for, and then decide if it's worth it.

You should be very clear about why you want to do this. You may or may not want to tell us, but if you can't explain it clearly and simply in one sentence you shouldn't do it at all.

Me, in a former life
https://www.gettyimages.co.uk/detail/news-photo/duncan-robertson-spokesman-for-eller-co-talks-to-the-media-news-photo/94833364

@CuddleDuncan

You want to set up a hosting facility, and then offer clients a discount if they don't use it?

Yes, this puts even clearer the point I was trying to make!

xandriarain

@cuddlerforu24 I do not have the space in my apartment to have clients, or I would have done that long ago. I share my two bedroom apartment with my boyfriend, two dogs, two rabbits and six guinea pigs and we utilize every square inch.

@CuddleDuncan I just purchased a 2020 Toyota Camry back in February and I pay $600 on car payments plus $200 in Insurance and on average I drive 2500-3000 miles a month primarily for cuddle sessions. I am already eating a huge cost of having a safe, reliable car so I can drive to clients all over the tri state area. Despite my willingness to drive far, some weeks I just don’t get enough business and the driving is really time consuming. In this current climate I need to be able to accommodate both customers who want me to travel to them and those who want a place to come to. I am limited by the number of clients I see because there is a pandemic and I think it’s reckless just try to start seeing multiple customers a day. If the pandemic was not a factor in this situation for one I would probably not need to get a space because I could have enough income from traveling to clients and it would just be more of a convenience thing. If there were not a pandemic, I could probably try and get two or three clients in that space every day. But I’m trying to be somewhat responsible and I’d like to only do one client a day maybe two on a rare occasion. This is in part is why I discount for longer sessions because I’m encouraging quality over quantity. I already have a great deal of overhead having a car that’s new and reliable and in order to accommodate both clients who want me to come to them and to accommodate clients who want to come to me, I am increasing my overhead and therefore I need to find a way to increase my pricing. Also all the businesses you mentioned like pop n rest Only exist in the UK and I am in the US. Another thing is right now the majority of my clients get hotel rooms. So at the end of the day even if I charge them an extra $40 they would still be saving money by coming to see me rather than getting a hotel. And I think a lot would be understanding that I am spending money on having a space to cuddle in. For me it’s not a question of if I increase my prices it’s how I do so in a fair way that helps cover my additional cost of overhead. But in one simple sentence; “The reason I’m getting the hosting space is because want the clients who will not see me now or as often because I do not host.”

Mike403

Ewww @ car payments. Your car payment is higher than my mortgage payment.

@xandriarain

Imagine if a pizza restaurant said, "One pizza costs $10. You can get it delivered or you can eat at the restaurant, but if you eat at the restaurant there's a $5 fee, because we have to pay for rent, utilities, etc."

That would be weird, right? Seems kind of backwards. But it's sort of what you're proposing.

You're basically setting prices according to the "cost plus" pricing model. That is, you take your costs plus what you see as a reasonable profit, and that's where you set your price.

This is considered a really bad model in a competitive market. It's looking at the market completely backwards. You should set your prices according to factors like value and competition. Your costs help determine your profitability and whether the business is viable, but they shouldn't determine your prices.

Charging more for hosting might be the right move - but if so, it's not to cover your costs. It would be because hosted cuddles are more valuable - maybe very few pros in your area offer hosting, so it's a rare commodity.

Even if hosted cuddles are more valuable, and you want to raise prices, my guess would be that the best thing to do is raise prices across the board - whether you're a host or a guest.

Here's a link if you want to read more about what's wrong with cost plus pricing:

https://www.accountingtools.com/articles/2017/5/16/cost-plus-pricing

Mike403

@CuddleMeLater - The pizza restaurant has to pay those bills anyway since they have to cook the pizza so it's already built into the price. It's not really a fair comparison.

@Mike403 It's a completely fair comparison. If she gets this new cuddle space, she's going to be paying for it whether her clients use it or not.

Regardless, again, the business's costs aren't what they should be using to determine their prices. The restaurant's bills were not "built into" the cost of the pizza - unless the owners don't know how to run a business, their bills were entirely separate from their pricing decision.

Mike403

@CuddleMeLater - Actually the business costs does matter. If they aren't making a profit, they either have to raise their prices or they go out of business.

@Mike403

Let me extend the pizza analogy. Let's say one day the pizza restaurant is hit with a massive unexpected bill. The owner panics and declares, "I can't afford this huge bill! I have to raise prices! Pizzas are now $15 each!"

Now consider two possible outcomes:

1. Plenty of customers keep buying pizza, and he makes more money due to charging more for pizza. Great. But in this case, he should have already been pricing his pizzas at $15! He could have been making more money all along! OR

2. Customers stop buying because his pizzas are now too expensive. The restaurant makes less money than before; they should have kept prices the same.

Do you see how the restaurant's costs are ultimately irrelevant to the pricing decision? If raising prices makes you more money, you should do it regardless of your costs.

If they aren't making a profit, they either have to raise their prices or they go out of business.

Again, if raising prices makes you more money, you should do it regardless of your costs.

Mike403

@CuddleMeLater - There are restaurants that charge $200 per head for a meal and people pay it. Why? Because they provide a very nice space and it is worth it for those customers.

@Mike403 I literally have no idea how that comment is relevant.

Mike403

@CuddleMeLater - wth? You were just comparing restaurants prices to cuddling. It is very relevant.

@Mike403 So any comment about the price of restaurants is relevant? Your comment did not address the point of the discussion in any way.

Let me try one more time and then I'll give up. Let's go with your restaurant that charges $200 per head. Let's say this restaurant is trying to determine whether to increase their price to $300. Right now they get 100 customers per week, so their revenue is $20,000 per week. They bring in an expert who does extensive market research, and the expert determines that if they raise their prices to $300 per head, they will only get 50 customers per week. This means if they raise their prices to $300, they will reduce their revenue, making only $15,000.

So they rationally decide to stick with the $200 price.

But suddenly their rent is raised. They have been paying $2,000 per week in rent. Suddenly it's drastically increased, to $4,000! Now does it make sense to increase their price? No, of course not. They've already determined that increasing their price will decrease their revenue. Their new expenses do not change that fact.

Similarly, if they determined that raising their price would increase their revenue, then that's the best move regardless of their cost!

I don't know how to make this any clearer. If something makes you more money, you should do it regardless of your costs. Maybe check out the link I posted.

Mike403

@CuddleMeLater - That's fine, but let people run their business the way they want to. There are pros here who have success charging $175 per hour.

@Mike403 ????

1. She literally posted here asking for advice about pricing.
2. My advice was not to keep her price low. If you think that, you have completely misunderstood everything I said.
3. I don't give a shit what the hell she charges. I was trying to be helpful by showing her some basic business/accounting ideas and giving her a link.

Mike403

@CuddleMeLater - btw, back to the restaurant example, when minimum wage went up, all the prices increased because they have higher expenses having to pay the employees more.

@Mike403 I don't know much about that, and it's not clear to me how much that's a real phenomenon vs. just something people are afraid of.

It's definitely possible changing costs may trigger a business to re-evaluate pricing and other aspects of their business. Also business owners don't always make rational decisions. Regardless, business costs should not generally be a significant factor in pricing for the reasons I mentioned.

Here's another link about cost plus pricing FWIW:

https://hbr.org/2018/07/when-cost-plus-pricing-is-a-good-idea

(Although, as always, this link says cost plus pricing is generally a bad idea, it does point out some potential upsides to cost pus pricing. For instance, it can be easier for a business to introduce price increases to customers if they justify them with cost increases. I suspect that's what's going on with these restaurants. Still... in general cost plus pricing is a bad idea. Don't do it unless you have a good reason.)

And with that I think I'll leave this thread so maybe somebody else can contribute.

CuddleDuncan

Apart from specific exceptions, cost plus pricing is a terrible idea. The customer does not care how much the product cost you: it is irrelevant to them.

@Mike403 yes of course a business's costs matter a great deal. They're just not important in pricing decisions: once you have figured out the cost, and the price you can charge, you then decide if you want to sell that product or not.

@xandriarain your excellent and informative post makes the solution relatively easy. (Although pricing decisions are never that easy!) I particularly appreciate your one sentence at the end - couldn't be clearer.

Continue to charge cuddling at your existing rates.

Being guest is currently charged at gas+tolls+parking. I would consider a mileage rate rather than just gas. This is normal in many circumstances, since everybody recognises that the cost of driving is much more than just the gas. Hotel is for the client's account, obviously.

You would love to host at a rate of .... whatever you decide to charge. Remember, this is not related to what it costs you. It is - ideally - the amount that will maximise your profits. This will take some experimenting to discover. It is obviously related to the actual costs of the travel given above, since nearby clients will be incentivised to make you travel. I would suggest special deals for existing good clients to make them do what you want. And unique un-special deals for clients you want to squeeze.

Making a table of distance/travel cost for areas/towns you go to frequently, and also for regular clients, will help you understand what your pricing should be.

To repeat, because it's a bit counterintuitive, the costs of creating and using the hosting facility are not relevant to how much you charge for it. However, the amount you charge for travel is extremely relevant. The cost of a suitable hotel is also relevant.

My feeling is that you should probably keep your cuddling prices the same, and bump up your travel prices a little bit to give you some headroom on the hosting rate. (Also perhaps to migrate certain clients from Guest to Host, which will save you time and effort.) Grandfather in your existing distant clients at the their existing travel rates, certainly for the first cuddle after any change.

Note that your purpose in hosting is to bring in more clients. Since these clients are new, and a facility has been created for them, the total revenue they bring should exceed the cost of the facility (in the long run). In other words, your first task regarding hosting is to maximise revenue. And maximum revenue occurs at the optimum price, not the maxiumum price.

In other words, figure out how much you can charge for hosting. And then figure out how it will cost you. And then estimate how many clients you will get. And then do all the sums and figure out if hosting is worth it.

cuddlerforu24

@xandriarain perhaps instead of absorbing all the costs and pricing yourself out of your clients budget you could network yourself with another pro cuddler in your area and split the cost of a rental place . Share the decorations expense and work out a housekeeping arrangement that is fair co ordinated with number of clients each of you uses the space for

pmvines

I can see someone paying a little more if the pro hosts considering all the complaints about pros not hosting and the client having to cover the cost of room plus travel for the pro. Seems charging a little more to host works out better cost wise? No ?

xandriarain

@cuddlerforu24 I don’t personally know any other pros in my local area. I would have to know and trust someone in order to have a shared space. Besides my office is probably a tad cheaper than splitting the cost of a one bedroom apartment.

Hollydollhugs

I’m trying to find a place to host also that is closer to where many clients are located. I’m debating Studio apartment to an office space. This has been a very helpful post.