Photo by Ian Schneider on Unsplash
The price of nothing, the value of everything
At a time when revenue generation has been strangled, many companies are looking forensically at their cost base. In the services economy this largely equates to personnel and establishment costs. Workspace providers are likely to be hit by a double whammy: many SME customers will require fewer desks and want to pay less for each one.
It could be argued that workspace providers have created a rod for their own backs by promoting a commodity market based on a ubiquitous desk rate. Price comparison is made extremely straightforward, and as a result discounting is therefore invited. Commercial people seem content to fill the desk (at any price) and seek increase it down the pike.
As the market gets tougher, providers must get smarter around pricing. Workspace providers need to be better and more creative at making the business case for their solutions. For example, ‘whole-life’ cost analysis of the proposed versus the customer’s existing office solution might be powerful. Equally, the perception of securing value for money might be enhanced by more creative “bundling” of products and services. Mobile network operators are particularly sophisticated in this respect. Perhaps there is merit in introducing pricing configuration sliders, an approach has been successful for car leasing companies amongst others. This approach seemingly empowers the customers to define their own price they pay monthly by configuration variables around the amount of deposit they are willing to put down and the length of the agreement. Looking at applying pricing concepts such as ARPU (average revenue per use), customer yield or life-time value might help workspace providers develop alternative pricing platforms.
There is no question that FlexOffice providers face acute challenges currently. However, those who have been acquainted with the CRE sector for many years will have experienced other periods of highly volatile and cyclical boom & bust. However bleak it looks now, the core business need for flexibility has only be heightened. This means the future is still bright for those providers that can get close to their customers and clients and be sufficiently agile to take advantage of the emerging opportunities that are out there.
