In Recession Specials, Small Firms Revise Pricing

In Recession Specials, Small Firms Revise Pricing

Discounts and Lower-End Offerings Help Lure Cash-Strapped Customers; Vans Complement Limo Service's Town Cars

By DANA MATTIOLI

Some small businesses are overhauling their pricing strategies amid the recession and finding new growth through lower-end offerings and discounts.

Towerstream Corp., a company that delivers high-speed Internet access to businesses, last year began finding it harder to gain and keep clients for an eight-megabit-per-second offering that then cost $999 a month.

In January, the company introduced a midrange product offering five-megabits-per-second for $500 a month, a price Chief Executive Jeff Thompson says he thought would be more palatable to cash-strapped customers. Although the average ticket item's price decreased as a result, the company had a record quarter for installations and revenue increased 64% in the first quarter from a year earlier. Towerstream, based in Middletown, R.I., this week lowered the price of its $999 plan to $899.

Lone Star Limousine, a transportation company based in Palo Alto, Calif., introduced lower-priced options in response to the economy. As companies cut back on spending, Lone Star noticed less-frequent limousine use. That, coupled with executives wary of the image they were sending by traveling in flashy limousines, prompted co-owner Jen Jaciw to take a different approach.

A year and a half ago the company added a van to its fleet of limousines, town cars and high-end sport-utility vehicles. The van, which was less ostentatious, cost less to rent and allowed the company to expand its client base. Ms. Jaciw says as the economy worsened, wedding parties and companies started choosing the van over limos. In March 2009 Lone Star bought another van to keep up with demand. "We established ourselves as a high-end luxury option, but it seemed like the right thing to do so we had a more economical option to offer," she says.

To supplement corporate accounts under pressure, Ms. Jaciw sought partnerships with different kinds of clients. She reached out to hotels, wineries, wedding venues and other businesses that might want to charter the vans. The efforts are paying off. Lone Star's gross is up $20,000 over the first quarter last year and the company hopes to gross $1 million by year end.

Other small businesses have found success by identifying rising costs customers were facing and trying to alleviate the burden. Facing flat sales as consumers delayed automotive repairs, Mike Cook, owner of Mr. Transmission of Marietta, Ga., considered offering incentives. Knowing that justifying a major repair in the wake of an economic downturn was becoming harder, Mr. Cook began offering food and gasoline vouchers to customers who had transmission overhauls, which account for 90% of his business.

In December he began working with a partner to offer $500 gasoline certificates with a transmission overhaul, which generally costs between $1,800 and $5,000. In January, he extended the program so the vouchers could be used for food as well. Customers get $25 a month on a Visa cash card for 20 months, which can go toward purchases at retailers such as Costco, BP and Shell.

"I think it makes it easier for them to go ahead and make that repair because they'll get some help with other expenses," Mr. Cook says. Although he declines to disclose how much the vouchers cost him, he says the fee is nominal. Mr. Transmission has recorded a 60% increase in sales so far this year compared with the year-earlier period, and Mr. Cook says the voucher program is partly the reason.

CouponCabin.com, a Chicago-based company that provides discount codes for online shopping, has seen its Web traffic rise amid the recession, with a 300% increase in visitors to the site during the fourth quarter from a year earlier.

For the six years since CouponCabin launched it had been focused primarily on soft goods such as clothing and home goods. But in November 2008, President Scott Kluth started to notice a surge of interest in grocery coupons, after years of declining consumer activity around them in the market. On April 15, the company launched a grocery-coupon section where visitors could print coupons to use at their local supermarkets. CouponCabin nets a few cents per print from each item's manufacturer.

"As long as people have to eat, adding groceries to the site was another way for visitors to save money," Mr. Kluth says. The section has become a hit with visitors and even attracted a new demographic of older users. When the section was introduced it had 14,000 coupons printed in two weeks, with more than 100,000 prints in May. Recently, a technology glitch caused grocery coupons to be temporarily unavailable, and Mr. Kluth says the angry comments from visitors made it clear that they value the addition. He plans to expand the section.

Write to Dana Mattioli at dana.mattioli@wsj.com

Printed in The Wall Street Journal, page B5