We left Marietta NDT on a factory-tour high but quickly crashed back to earth. It was a Thursday, after all, and it was hard to say which of the three of us was most exasperated with the other two. Adding to our troubles was the unpleasant fact of being in a major metroplex; our travels through rural America had spared us, mostly, from the dense traffic of spots like suburban Atlanta. The combination of lack of sleep and the late spring heat was making Mike a tad carsick in the backseat.

Up front, meanwhile, a battle raged over how to get to our next destination. “We could take State Road 280,” Paul mused. “That would be more interesting than the interstate, but there might be a lot of stop lights. Oh, but the freeway was jammed earlier this morning. After some twenty minutes of missed turns and angry barbs, we were hopelessly lost and boiling mad. Finally, Mike pointed to a large billboard with a jumping dog and an arrow labeled “TURN HERE.” Scott— finding at last a safe place for a U-turn— drove down the side road as the sign directed and we arrived.

We found a typical suburban industrial park with a series of connected low buildings. Inside the main entrance, we were rewarded: a bright retail space with concrete floors and— a golden retriever to greet us! Three or four dogs soon milled about us, giving each of us a furry friend to pet. After a few minutes, our slacks were covered with just-shedded fur, but our moods had improved considerably. Walking past a row of shelves displaying dog toys and designer food, we stopped at the front desk to ask for Robin Crawford, the owner of Dogma Dog Care.

Robin, an African American in her mid-fifties with short hair, greeted us with a big smile and firm handshakes. With the promise of more dogs, she coaxed us into taking a tour of the facility. From the retail and intake area in the front, we walked back through a veritable maze— passing by rooms of different shapes and sizes. There was a large open room with some dogs playing together and some resting by themselves. A different area had a couple dozen crates on shelves where dogs would spend the night. We rounded a corner into a hallway with a series of doors, each painted with different designs. These were themed suites where some dog owners liked to board their best friends.

Our tour ended in Robin’s office, where she described how she came to own a doggie-day-care business. A former human resources professional, Robin had built a successful career with a six-figure income overseeing diversity programs for large corporations like IBM, Coca-Cola Enterprises, and WellPoint Health Networks. Her skills and expertise, however, were not sufficient to avoid being laid off as each of these companies downsized. Exhausted by the corporate world, she decided to do something completely different.

“I always had a love of dogs,” Robin explained, and after being put through these corporate upheavals, she needed a change. “I’d had it— mentally, spiritually, financially. I wanted to do what I loved. I’d been toying with this idea for years, but I just didn’t have the courage. How do you give up the security of a successful career and go out into the abyss, the unknown?”

Robin’s challenges in the corporate world ultimately gave her the push that she needed to set out as a business owner. But the philosophies that guided her work as a diversity officer continue to guide how she operates a business that, on the surface, is quite different.

“What I am trying to do here is the same sort of thing. I take pit bulls— because I don’t believe that every pit bull is bad. I believe you judge a pit bull on its character. We do a temperament test on every dog, whether it’s a poodle or a pit bull. If they can get along with other dogs, with a female handler or a male handler, if they have a gentle personality— then the pit bull is allowed to come. People appreciate that I am not narrow in my approach.”

“I never thought of diversity applying to pit bulls before,” Paul joked. But the idea struck a chord with Mike, who had once owned a pit-bull mix and often felt judged by other dog owners.

Robin uses a similar approach in providing options for her customers— recognizing that different people might have different preferences for their dog’s accommodations while at Dogma. “I don’t just have caged boarding or open boarding alone,” Robin described. “I offer all of it. My philosophy is to offer a diverse set of things— a diverse set of products and services.”

The strategies Robin uses to price her diverse offerings are rooted in one of the most important concepts that economists use to think about pricing. A simple but important point is that customers are more likely to buy a particular product if the price of that product is lower. This sets up a clear trade-off between margin and volume. Higher prices mean higher margin and lower quantity; lower prices will increase your quantity but at the cost of a lower margin. Balancing this trade-off requires understanding how sensitive your customers are to price. If customers are sensitive to price, then pushing for a higher margin will cost you a lot of volume. Conversely, if customers are not price sensitive, then you can raise prices without losing a lot of customers.

Understanding the drivers of consumer price sensitivity is therefore crucial for effective pricing, and there are two primary considerations. The first involves customer preferences. If customers really like the product or service you offer, they are apt to stick with you if you raise your price. The second consideration is competition. If customers have a reasonable alternative to what you are selling, you will be more vulnerable to losing sales if you raise your price.

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