When it comes to the complex question of hot tub pricing strategies, there isn’t a one-size-fits-all method. The right approach depends on a web of varying factors.
“Pricing is a bit of a sensitive topic,” says Carlos Donaldson, director of strategic accounts for Watkins Wellness in Vista, California. “Our dealer network is solely responsible for setting their own retail pricing, in accordance with antitrust laws.”
The tricky bits
Antitrust laws have a basic objective: to protect the process of competition for the benefit of consumers, ensuring there are strong incentives for businesses to operate efficiently, keep prices down and keep quality up, according to the Federal Trade Commission.
The Pool & Hot Tub Alliance’s antitrust policy states: “Any agreement as to price among competitors is a violation of the Sherman Act, regardless of the reasonableness of the price set or whether the agreement is to raise, lower, peg or stabilize price levels.”
The policy explains that any discussion of price at association meetings is not permitted. This includes discussions about prices of products, supplies, services or elements of company operations that might influence price, such as company costs of operations, allowances or discounts, terms of sale, margins and plans of individual companies concerning production, distribution or marketing of particular products.
While pricing specifics may be off the table among retailers, there’s plenty to glean from consumer studies, general information and FTC-friendly tips from industry professionals.
The customer’s POV
In “The Ultimate Guide to Retail Pricing and Promotions,” Christoph Gerber, founder and CEO of Talon.One, a global sales promotion software company, writes that consumers don’t differentiate between pricing and promotions: They only care about the final price.
“That’s why effective price positioning and signaling value to the customer shouldn’t live in a silo,” Gerber writes.
He says a holistic approach that includes teams, pricing, promotions, loyalty and personalization is required.
Citing a 2021 study by Forrester Consulting, Gerber notes that 77% of consumers say discounts influence their choice of where to shop.
“When implementing markdown pricing or sales prices, both the direction and frequency of price shifts has a big impact on shoppers’ purchasing decisions,” Gerber writes. “More broadly, brands should also be thinking about how out-of-the-door prices affect shopper behavior and testing any areas that can introduce savings for the customer.”
This could include introducing product bundles to reinforce value to customers, or lowering delivery costs, Gerber explains.
Consider how pricing and promotions will affect brand image. Promotions can be a double-edged sword, particularly for luxury brands. While there’s no doubt they increase sales and attract new customers, they can also weaken brand perception if they’re not implemented wisely.”
Christoph Gerber, Talon.One
“Consider how pricing and promotions will affect brand image,” Gerber says. “Promotions can be a double-edged sword, particularly for luxury brands. While there’s no doubt they increase sales and attract new customers, they can also weaken brand perception if they’re not implemented wisely.”
A 2023 study by Harvard Business Review based on 5,000 adults across the U.S. and Europe found that when consumers saw the price today was lower than it had been in the past, they were more likely to buy now because the current price seemed like a good deal.
The study concludes that for sellers, a single large price decrease or a series of smaller price increases will be most effective — rather than slowly lowering the price over time.
Strategy tips from the pros
When pricing or financing, always start with the consumer in mind, Donaldson says. He suggests retailers ask themselves these questions to gauge their approach:
- What is going on in the customer’s world that might influence their purchasing decisions?
- How can you be more transparent in your pricing?
- What might a customer buy instead of a hot tub (boat, jet ski, motorcycle, camper, etc.)?
- From a financing and advertising standpoint, how are these items positioned or priced in your market?
- Do your customers know that you offer financing before they get to your showroom?
- Is your pricing helping or hindering people from deciding to purchase?
Donaldson notes that while financing is not free, it can help start more conversations and make the purchase decision less intimidating for customers.
Sean Schaben, vice president of Hot Springs Spas and Endless Pools of Iowa and Minnesota, says unless a new retailer is taking over an existing business, they’re going to face some challenges, but the pricing aspect is less about specific methods and more about keeping track of everything so you know how and when to adjust.
Every state and every market is different. At the end of the day, you want to be fair with your pricing so you can take care of your customers for years to come.”
Sean Schaben, Hot Spring Spas and Endless Pools of Iowa and Minnesota
“Every state and every market is different,” Schaben says. “At the end of the day, you want to be fair with your pricing so you can take care of your customers for years to come.”
For new retailers, Schaben says you must understand your market and what you can offer.
That might look like adjusting to a price where you don’t make as much margin so you can get customers. “You want to get yourself established, but you don’t want to cut your own throat,” he says. “You want to make sure that you’re paying all your bills and all your responsibilities are taken care of.”
The hard cost of products from the factory, freight to your destination, overhead costs for your brick-and-mortar, labor, administration, employee benefits, marketing expenses, training expenses, financing expenses, vehicle and equipment expenses, commissions and taxes all factor into pricing.
Once all factors are considered, Schaben says you have your pricing strategy template. “Price your products according to what your market allows you, based on features and similarities within the industry,” he says.
Schaben explains that incentives from the manufacturer can also play a role in financing and what options and programs are available to offer the public.
“Periodically, we see our suppliers work with various lending institutions to help us adjust our pricing that’s favorable to our customers by way of buying down interest rates and allowing us to give rebates if the customer chooses not to finance,” he says.
Schaben also says new retailers need to be in 100%. It’s a great industry, he says, but if retailers don’t have the trained delivery, service and salespeople in place to handle it all, they may not last long.
“We wouldn’t have been in this industry as long as we have if we hadn’t figured it out a long time ago,” Schaben says. “It takes a group of good people; you’ve got to have the right culture in your business to make it hum and make it roll.”