Curiously enough, undercharging for your services often leads to your business’ highest-value customers not purchasing your products since they are not prepared to wait around for you to service your lower-value customers first.

This is due to the fact that your customers often pay much more than just the purchase price for your business’ products and services. One of the most significant of these other costs is time, particularly the time waiting to get the product or service.

At first glance, a restaurant with a long line out the door seems like it has a great business model. However, by forcing its customers to wait so long in line, the restaurant is actually prioritizing customers who value their time less over those who value it more. Even more concerning, as time is money, people who have more time often have less money to spend which explains, for example, why they prepared to wait in line for 30 minutes to have a cheaper meal. Unfortunately for that pricing model, your business is losing out on customers who are not prepared to wait in line, which people often happen to be those who have the most disposable income to spend on your business.

Another classic example is concert tickets which are sold at a cheaper price to the people who spend hours waiting in line to buy them only to then be resold at considerably higher prices to people who weren’t. In this example, we can clearly see the premium which people are prepared to pay in exchange for not losing their time waiting around, namely difference between the list price and the reseller price. This also results in the scalpers earning a cut of the ultimate ticket price at the expense of the artist and maybe the venue.

From a business standpoint, this is a very inefficient result since additional revenue which would otherwise go to the artist is being diverted to a third party. And it’s not like by having lower prices, the artist is being a more altruistic since many of the concertgoers are actually paying significantly more than the list price for their tickets when they buy them from scalpers. At that point, might as well have the artist raise its ticket prices and cut out the middleman. Or, alternatively, the artist can set some tickets aside to be sold at higher prices to ensure that those higher priced tickets won’t sell out right away, meaning that potential concertgoers who were not prepared to wait in line can still purchase their tickets directly from the artist or venue. This results in more money in the artist’s pocket and, as long as those higher priced tickets don’t sell out, it establishes a ceiling price for the scalped tickets.

As we have seen, you need to be very mindful that your customers may be paying part of the aggregate price for your business’s products or services through the value of their time, which diverts this value away from your business all the while turning away customers who were not prepared to wait.

This also applies to businesses where there are long production backlogs or waiting lists. Long delays turn off customers who want their products sooner. To have your business benefit from those customers who are prepared to pay more, consider either raising your prices (to decrease demand) or having a surcharge option to be prioritized and to jump the queue.

Similarly, amusement parks often sell fast passes to let their holders skip the line for different rides. This ensures that the amusement park collects more from those people who are not interested in waiting in line. In the same vein, calligraphers often in have a “rush job” surcharge, normally around 50%, to have them prioritize a job and to have it completed faster than their normal turnaround time. The fact that customers are prepared to 50% more than the list price points to your business’ significant potential lost income if it does not provide for those high-paying customers to jump the queue. Accordingly, always make sure that you offer such an option, and make that policy clearly visible and known. As his policy seeks to attract people who have limited time, it needs to be easy to find or it’s self-defeating. Best of luck!