Our last article in this Blog Post Mini Series was dedicated to dynamic packaging as an efficient technique to increase customers’ average basket value in order to counterbalance the loss of volume due to slow international tourism, government restrictions, new customer behaviour, etc.
This second article will keep focusing on navigating the post-COVID new normal. This time, we will tackle to problem of museums, attractions, amusement parks, music venues and theatres facing regulations that limit their economical viability because of restrictions on occupancy levels.
The major problem with these restrictions on occupancy is that they cut cultural and tourism providers from a high number of visitors on peak times, while not offering any incentives for the same visitors to visit during down times.
At Smeetz, it’s a problem we have been analysing for a while now, even before COVID. Alright, the situation was not so extreme 3 years ago, but today perfectly illustrates the reason why we have decided to create Smeetz as being the first ticketing and dynamic pricing software to manage prices for you in order to regulate the demand and optimise your revenue based on available stocks.
Why is dynamic pricing the solution?
To keep it short, in the economic literature prices help direct consumers’ decisions towards the best available option for both the buyer and the seller. With or without capacity restrictions, your products and services don't have a constant and equal value to your customers over time. Dynamic pricing allows you to automatically reflect the changing value of your products and services depending on your business' underlying conditions (date, time, weather, available stock, etc.).
For instance, if bad weather negatively impacts the consumer's experience during your activity, this should be reflected in the price. Similarly, if it’s holiday season and you expect to be sold out relatively quickly, your price should also reflect the higher value of your offer during this period of time.
With bookings now happening mostly online, it allows you to make faster and more efficient price changes to account for a changing environment and optimise your constraints, while offering the best available options to your customers.
What you might have heard about dynamic pricing
Dynamic pricing has been around for many years in different industries such as airlines, hotels, e-commerce with different terms such as revenue management, yield management, etc., but it is relatively new in the leisure, cultural and entertainment industry. Consequently, this has given rise to several misconceptions about dynamic pricing and its applicability in our industry, which we will try to debunk in this section.
- “Dynamic pricing will erode my yield and my revenue” - False, you will maximise your revenue on the best days and be able to eliminate “unfenced” discounts that hurt your profitability on these days.
- “My clients won’t understand to buy this way” - False, from airline tickets to hotel rooms, customers are used to pay different prices depending on when they purchase.
- “My customers might be angry if they paid a different price” - False, as long as a customer knows why they paid that price for a ticket, they are unlikely to be upset if other customers paid another price.
But what are the risks associated with dynamic pricing?
The major risk of dynamic pricing lies in the communication that surrounds its adoption. For instance, Amazon was famous a couple of years ago, when some books' prices were correlated together and spiked out of control.
More recently, news outlets have badly criticised some ski resorts for their management of dynamic prices as prices went to the roof. Therefore, we highly recommend setting up price boundaries and communicating in full transparency that prices vary according to a set of pre-defined factors.
Why should you start with dynamic pricing now?
Since the benefits of dynamic pricing clearly outweigh the risks, we would strongly recommend you to implement dynamic pricing in order to counteract last-minute booking trends and declining occupancy rates due to COVID-19 by optimising your limited capacity.
Implementing automated pricing strategies with dynamic pricing will help you navigate with limited occupancy and turn the situation to the best of your advantage by:
- Securing more pre-sales by encouraging your customers to buy tickets more in advance.
- Optimising your capacity management and spreading visits between peak and low periods.
- Offering prices that closely follow your customers' willingness-to-pay and increasing your revenue.
In addition, more and more leisure providers are beginning to adopt the practice, so the longer you wait, the further you’ll fall behind your competition.
If you’re curious how Smeetz can help you design and implement successful automated pricing strategies with dynamic pricing, you can take a look at our Smart Pricing White Paper.
Free Smart Pricing White Paper
Discover the 5 benefits of using dynamic pricing for the leisure and cultural industry.
How do I move forward implementing dynamic pricing?
First and foremost, you need to clarify your goals and constraints when designing pricing strategies. While some businesses will rather look at an increase of the revenue, some others will prefer to balance occupancy across different times, dates, etc. In the same time, constraints should be taken in consideration in order to not conflict with regulations, customers’ habits, etc. When planning for the adoption of a dynamic pricing software, you should make sure that your whole team participates in the discussions. This should include marketing, operations and management teams.
Second, when your pricing ambitions and constraints are clearly defined, you should start looking for a software that will help you achieve your goals faster by automating the manual work. The chosen software should be flexible enough to follow you in case your objectives evolve.
Don’t settle for softwares which have limited innovation in the space, or if a change in pricing strategy requires the support of a technician. Your business team should remain the sole master of your pricing strategy. We would also strongly advocate for a solution that is an integral part of your ticketing and sales' system in order to avoid complex integrations, maintenance or operational mistakes between both softwares.
Third, once you have your objectives and your software in place, you can start translating your pricing objectives into pricing strategies.
You don’t need to automate your entire pricing from the start. Our best advice is to start instead with one product or category, learn how the tool works, and eventually go to more complex strategies.
Why not conduct A/B testing? Start by testing several pricing models and only show dynamic prices to a pre-defined percentage of your audience. Once familiar with simple strategies, take the next step and develop your own strategies based on your sales forecasts and artificial intelligence.
To learn more on dynamic pricing, check out this page.