The bottom line goal of every business venture is to maximize their business potential, generate significant cash flow, and earn maximum net profit. Smart coworking space business owners know that, in today’s modern economy, coworking spaces aren’t limited to one pricing strategy. Depending on your amenities, business offerings, niche market, and overall business strategy, the right mix of coworking pricing strategies can spell the financial bottom line of your coworking business.
In this article, let’s dive into various pricing strategies you can implement for your coworking business—how they work and which will bring your business the most growth and profit.
The importance of pricing strategies for coworking spaces
Entering the coworking space industry requires significant investment in real estate, facilities, and equipment, leaving many coworking space owners in debt to finance the business. Understanding the meaning behind pricing strategy and its significant impact on your business is crucial in keeping your coworking space business going—including maintaining positive cash flow, debt relief, and increased profit and profit margin.
While pricing strategies ultimately affect your coworking space profitability, here are some other ways in which effective pricing strategies can positively impact your business:
- Market positioning. Effective pricing strategies allow you to offer a unique value proposition compared to your competitors by providing tailored pricing schemes that cater to your market’s needs and current position. For example, a penetration pricing strategy allows new entrants to attract new customers and gain market share by introducing a low or discounted price to penetrate the market quickly.
- Attract customers. Your business prices quickly determine how you’ll attract customers throughout your operations—price it too low, and you’ll gain market share but sacrifice business profitability. The key principle is to find the optimum price point to earn profit while offering valuable services to your customers commensurate with the price they pay.
- Revenue generation. To determine profitability, any coworking space business plan must include the right pricing strategy and an effective revenue model.
Generate recurring revenue and offer exceptional customer experience at your shared or coworking space
Best pricing strategies for coworking spaces
Any business can employ one or multiple types of pricing strategies to optimize revenue and profitability, and coworking spaces, by offering a wide variety of amenities and services, can use one or more pricing strategies listed as follows:
Tiered coworking pricing
Tiered pricing is a strategy that offers tiers or levels of pricing based on the quantity or volume of the product or service provided. The psychology behind this model is convincing customers that they can get premium services for a better deal or cost when they subscribe to a higher-tiered price instead of purchasing them separately.
For example, consider a start-up managing a hybrid team in-state and in a different country that often conducts online meetings and might regularly need access to private meeting rooms. Regular tier pricing would only give them access to shared workspaces, while you can offer higher-tiered prices in exchange for unlimited (and scheduled) meeting room access.
Example:
WeWork offers a tiered pricing model for its membership solutions, with the Basic Plan allowing you access to more than 100 WeWork locations with one coworking space booking per day and two credits for meeting room bookings. Meanwhile, the higher tiered Plus Plan allows you access to more than 450 locations, with one coworking space booking per day and five credits for meeting room bookings.
Coworking packages (or product or service bundling)
Offering products and services in a ‘bundle’ or a ‘package’ allows a coworking space to provide all or some of its amenities and space usage at a fixed monthly price or for a more extended period.
Some examples of coworking packages include:
- Separate packages for hot desks and dedicated desks.
- Coworking packages that include the use of a virtual mailbox or a corporate address.
- A weekender membership plan or package targeted to side hustlers and part-timers.
- A graveyard shift package that offers pricing based on non-peak hours.
- A private office package complete with a private space, meeting room access, telephone number, and/or complimentary beverages.
The advantage of implementing coworking packages is that revenue streams from this pricing strategy are predictable, making regular revenue budget, assessments, and cost management easier for coworking businesses.
While coworking packages are a great strategy, business owners must carefully draft contracts outlining inclusions and exclusions and manage them with contract management software to ensure that contracts are clear, accessible, well-kept, and up-to-date for all parties involved.
Example:
WeWork offers coworking packages, like hot desks for solo individuals, move-in-ready offices with shared or private amenities for 1 to 100 individuals, or a full floor office for 50 or more people with add-ons or customization options.
Day or hour passes
Many remote workers aren’t in it for the long term and are looking for more flexible ways to access coworking spaces. By offering day or hour passes, remote or hybrid workers can rent hot desks based on their actual time worked, allowing them to work in a coworking space or a coffee shop on a bright sunny day.
One tip: Day or hour passes need not be so dry and simple. Think of these short-term passes as trial versions of your coworking space for potential remote workers looking for the perfect permanent space to work from. Go above your competition by offering free drinks or snacks for a day pass or an amenity voucher to let them know what other things your coworking space offers.
Example:
Us&Co in London offers day office hire, where members can rent a private, flexible workspace for a select number of days per week without any commitment. You also pay only for the day you use the workspace.
Dynamic pricing
If you’ve ever tried purchasing a concert ticket or booked accommodation, you probably already know what dynamic pricing is. Dynamic pricing, in its essence, is the real-time update of a product or service’s price based on its demand and supply in the market.
In dynamic pricing, business owners can use web scraping tools to gather relevant data on a product’s current demand and supply in the market and competitor pricing. This data reflects current market conditions and updates prices in real-time to maximize revenue and profit.
Today, this dynamic pricing strategy is already being implemented as a service for many coworking spaces. Based on user search data, business owners can raise prices when the demand for coworking space is higher or lower on days with seemingly no demand. In addition, coworking businesses can also raise prices for their day and hour passes when there is an event or conference for professionals who may need work or meeting spaces nearby.
While dynamic pricing can significantly improve revenue and overall profitability, this strategy can quickly backfire. Due to pricing inconsistencies, customers may become dissatisfied, branding businesses that use these schemes as exploitative.
Example:
The Malin partnered with a tech platform to implement a dynamic pricing model when booking a meeting room or coworking space by asking you to input the location, date, and the number of people involved and showing you availability and price ranges for that specific date.
Penetration pricing
New entrants to the coworking space industry can use penetration pricing to gain market share and attract new customers, especially in areas where other coworking spaces already exist.
In penetration pricing, coworking spaces can offer lower-than-market prices or tiers as an initial offer to entice customers to switch from their competitors, especially in an industry with little product or service differentiation.
For coworking spaces, examples of penetration pricing include:
- Offer a 50% discounted price for first-time members or users.
- Offer free trial periods.
- Offer discounts for tiered-level pricing, especially for basic packages or tiers that most new customers often use.
- Offer early-bird pricing for customers who sign up for membership within a specific time frame.
- Referral rewards or incentives for new members for every successful referral to the coworking space.
Premium pricing
In contrast to penetration pricing, premium pricing is ideal for coworking spaces that have already established their brand and service in the industry. In premium pricing, a business can offer higher-than-usual prices for services and offerings against standard market rates to create the impression of luxury and quality. Of course, these premium pricing offerings should also be coupled with equivalent higher-than-standard services and amenities to justify their cost.
Coworking spaces planning to implement premium pricing should bring to the table premium amenities and services, like:
- Fully furnished amenities on private floors.
- Branded receptions, meeting rooms, executive offices, and pantries
- Priority access to event spaces in the coworking space.
Most niche coworking spaces offer these premium pricing strategies because they offer specific, tailored amenities to a particular target market.
Example:
Lina is a medical coworking space that is priced higher than regular coworking spaces because it specifically caters to medical professionals. It offers a HIPAA and OSHA-compliant clinical space for check-ups and sound-proof spaces for therapy sessions.
Monetizing event spaces
Many businesses need workspaces and event spaces. While some coworking spaces typically offer hot desks, dedicated desks, or shared and private work areas, few provide event spaces for seminars, team-building exercises, etc.
If your coworking space has a dedicated event space, consider monetizing it separately—even for teams not members of your coworking space. You can price this at a fixed rate for a minimum number of hours of use or hourly, whatever works best for your business.
Example:
Regus, a coworking space, allows you to rent its event space for a private or corporate event. The event can be fully catered and supported by Regus or an external organizer.
Wrapping Up
The rise of flexible and hybrid work globally has increased the demand for coworking spaces over the past few years. Unsurprisingly, more businesses want to take advantage of this momentum and significantly profit from the coworking space industry.
However, coworking space owners cannot achieve this profitability without the proper pricing strategies. Diverse pricing strategies, such as tiered pricing, packages, short-term passes, dynamic pricing, penetration pricing, or premium pricing, allow coworking space owners to maximize the profitability of their business ventures, generate cash flow, and continuously provide valuable offerings to their members.
Frequently Asked Questions (FAQ)
Q: How do I determine the right pricing strategy for my coworking space?
A: The best pricing strategy depends on various factors, including your location, target audience, amenities, operating costs, and competitor pricing. Analyze your unique value proposition and align your pricing to reflect it. Consider experimenting with different models like tiered pricing, packages, or dynamic pricing to see what resonates best with your market.
Q: What are the key benefits of having a well-defined pricing strategy?
A: Effective pricing strategies can lead to improved market positioning, attract the right customers, optimize revenue generation, enhance profitability, and provide a competitive edge. It allows you to tailor your offerings to different customer segments and maximize your space utilization.
Q: Should I offer different membership tiers in my coworking space?
A: Yes, tiered pricing can be highly effective. It allows you to cater to a wider range of needs and budgets by offering different levels of access and amenities at varying price points. This can attract both budget-conscious individuals and those willing to pay more for premium services. For example, a basic tier might include hot desk access, while higher tiers could offer dedicated desks, private office access, and more meeting room credits.
Q: What are coworking packages, and how can they benefit my business?
A: Coworking packages bundle various services and amenities for a fixed price, often for a monthly or longer-term commitment. This provides predictable revenue streams and can attract members who value all-inclusive options. Examples include packages for hot desks, dedicated desks with virtual mailboxes, weekender plans, or private office bundles with meeting room access and other perks.
Q: Is it worth offering day or hour passes for my coworking space?
A: Yes, day and hour passes can attract remote workers seeking flexible, short-term workspace solutions. They also serve as an excellent way for potential long-term members to trial your space and its amenities before committing to a membership. Consider adding value to these passes with complimentary offerings like drinks or amenity vouchers.
Q: What is dynamic pricing, and when is it appropriate for a coworking space?
A: Dynamic pricing involves adjusting prices in real-time based on demand and supply. While it can maximize revenue, it's crucial to implement it transparently to avoid customer dissatisfaction. It might be suitable for meeting room bookings or day passes, where prices could fluctuate based on peak demand times or special events in the area.
Q: How can penetration pricing help a new coworking space?
A: Penetration pricing involves offering lower-than-market prices initially to attract new customers and gain market share, especially in competitive areas. This could include discounted first-month memberships, free trial periods, or early-bird sign-up bonuses.
Q: When should I consider using premium pricing for my coworking space?
A: Premium pricing is suitable for established coworking spaces with a strong brand and high-quality amenities and services. By charging higher prices than the market average, you can create an image of exclusivity and quality. This strategy requires delivering superior value through top-notch facilities, advanced technology, and exceptional services, such as fully furnished private floors or priority access to event spaces.
Q: Can I generate additional revenue by monetizing event spaces within my coworking facility?
A: Yes, if your coworking space includes dedicated event areas, you can generate significant additional revenue by renting them out to both members and non-members for seminars, workshops, team-building activities, and other events. Consider offering different pricing structures based on the duration of use and included services.
Q: How important is it to analyze competitor pricing when setting my own rates?
A: Analyzing competitor pricing is crucial to understand the market landscape and ensure your rates are competitive yet profitable. Identify what your competitors offer at different price points and use this information to position your own pricing strategy effectively. However, don't solely base your pricing on competitors; focus on the unique value your space provides.
Q: What are some common mistakes to avoid when developing a pricing strategy for a coworking space?
A: Common mistakes include underpricing and undervaluing your services, not considering all operating costs, having overly complex pricing structures, neglecting to monitor and adjust pricing based on market feedback and demand, and lacking transparency in pricing, which can lead to customer distrust.
