How We Slashed Prices Without Hurting Our Brand

By Thoryn Stephens, President of Syncopate, Los Angeles
Five years ago, I left my job as a cell biologist in pharmaceutical drug development to turn my passion for music into Syncopate. We offer companies like Google, Microsoft, and the Gap team building exercises with a twist: We throw employees together in a high-pressure situation to create a song or music video. Along the way, they discover that Bill the receptionist is a great project manager, say, or Evan the CFO does a mean funky chicken.

However, during the recession clients' budgets shrank and they looked elsewhere for less expensive alternatives -- which means we saw a 30 to 40 percent decline in revenue. We had to think innovatively about how to meet the changing market. We didn't want to lose customers because our prices were too high, but we also didn't want to devalue our expertise by slashing costs.

Price became a barrier
Typically our program includes something we call Scratch University, where teams of employees work together for three to four hours to create and perform a song, DJ performance, or viral video for the other employee teams. Each person takes on a specific job -- music producer, project manager, scratch DJ, and multimedia supervisor, among others. Teams must collaborate efficiently, as they have limited time to create their final product.

They then do a final performance where people see their peers' creativity -- specifically their song, name, logo, and DJ performance. We've seen chief medical officers lead conga lines and tech executives literally take a flying leap, land on their stomach, and do "the worm" across the stage.

But during the recession some companies weren't willing to spend the money for our services. Shortly after I launched Syncopate, Google asked us to do a team-building event. The company's budget was 50 percent lower than our price structure, which was fairly typical for a larger company looking to cut expenses but still have a meaningful experience for their employees.

Product pricing can be complex, especially when you offer a novel service. If you make a tangible product, you use the materials and labor costs to help arrive at a price. But we have fewer fixed costs and initially based our pricing on the value for the client. Our events range from $5,000 to more than $100,000, with an average event running $15,000 to $20,000, depending on the exact program, group size, location, and facilitator.

An opportunity to recreate our offerings
We found a way to address our pricing challenge when a solar power company called SunPower approached us in late 2009. Again, its budget was 30 to 40 percent lower than what we typically charge. But instead of turning down the job, I decided to develop an approach that would work within the company's constraints -- knowing that it would also meet our broader need for a more cost-effective product.

SunPower wanted an event for 500 employees -- which would be by far our largest event thus far -- and wanted to do it in 90 minutes, less than half the length of our typical program.

We analyzed our fixed costs: staffing and materials. We have five full-time employees and about 20 contract workers; at events we need a computer for each team and a customized set of cards with job descriptions. The client gravitated to the core of what we do: put on an event in which teams create or remix a song. That led to the big question: How could we trim costs and still meet the client's goals?

Teaching a team how to DJ is labor intensive -- it takes time to teach people listening skills, rhythm, and the basics of scratching. So we cut the DJ portion. We also cut the time-consuming showcase at the end. And we made the team sizes larger, thereby reducing the number of staff needed for instruction and logistics.

A great product for a lower cost
We finally came up with a program that we called Fast Sync. It retained many of the elements of what we do for the longer programs -- teamwork, music, business simulation -- but in a limited amount of time and for a price that was lower but still enabled us to make a profit of $115 per person.

We divided the group into teams of eight, each of which had a flat-screen Mac. We took an a cappella version of SunPower's company song, and gave each team 90 minutes to remix the song to different music and come up with a team name and logo. By the end of the 90 minutes, teams created 70 songs. The teams debriefed what they'd learned internally and I then facilitated a discussion with the entire group of 500, discussing the experience and the parallels to their day-to-day work activities.

Fast Sync has turned out to be one of our strongest offerings. In the last three months we've had a 10-fold jump in inquiries compared to the same period last year. Though our revenues declined by 40 percent in 2009, this year we are on target to bring in our highest revenues yet -- more than $400,000 -- and we are profitable. Fast Sync accounts for nearly half of the programs we have under contract thus far.

Prior to this experience, our offerings were not as clearly defined -- our product and pricing were customized for each client. But the new economic environment pushed me to more tightly classify our offerings. Now, when a potential client approaches us with particular budget constraints, I can immediately identify what we can offer them.

-- As told to Caitlin Elsaesser

Resources

• Learn more about how to price your product.
• Tips on determining pricing specific to business services.