Many resorts or attractions want to implement dynamic pricing to increase revenue, grow yield, or attract more guests. Regardless of which goal you’re after, you want to sell as efficiently as possible, and not leave any money on the table or influence customer behavior to your disadvantage in the long term.
Instead of trying to tackle developing a more effective strategy in-house, many resorts or attractions look to an outside expert to help, and these days, there are multiple choices. If you’re shopping around for a pricing partner, we recommend making sure to ask the following five questions during your search.
1.How large is the provider’s dataset?
Or to ask more directly: How accurate and reliable will the pricing strategy be? Since data is the basis for successful pricing, your pricing partner needs to have a large amount of data relevant to your business for pricing. What do we mean by “relevant”? It is one thing to have historical visitation data from a resort; information about conversion rates is another. In other words, data on when customers buy, at what price, and how often they convert, are critical components of building a pricing strategy. At Catalate, we’ve been collecting data on millions of customer interactions for 15 years, which we use to continuously improve our pricing model. It is unlikely that a provider with significantly less data can develop similarly efficient pricing strategies and measure success and failure in a comparable way.
2. Does the provider recommend dynamic or static window rates?
It may seem lucrative at first to get a little more out of your peak days by making short-term changes to the window rates (e.g. raising the window rate on a morning if it’s looking good!) But, fixed window rates have their own important benefits. When window rates don’t move, it is much easier to influence customer behavior in the direction of advance sales in the long term. It is known from price psychology that an anchor price (or: reference price) increases sales. Since customers know the price they will pay if they wait to buy, they can always judge the value of your online rate and see the advantage of buying now. At the same time, the guest’s focus is shifted away from the (sometimes significantly higher) window rate towards the online price and walks away feeling great about the price paid.
And no less important: Dynamic window rates can have a negative impact on customer satisfaction. It can create a poor customer experience if guests don’t know how much they will pay when they arrive at the ticket line – especially when the price is higher than expected.
3. What types of relative metrics can the provider provide?
Relative metrics enable you to compare your performance with other resorts or attractions, and better identify areas of success and failure. Does your pricing partner have access to a network of data? Are they able to regularly provide these metrics to you alongside benchmarks so you can assess your performance?
Some metrics we care about and report on to our partners include demand capture and revenue per search (both proxies for conversion) and searches per visit, which measures top of funnel traffic to your online store. These metrics help assess all parts of the e-commerce funnel, from marketing effectiveness down to purchase.
As you may have already recognized, data from as large a partner network as possible is essential for comparisons with competitors and for more security when interpreting the metrics.
4. Does the provider use a time-based or a quantity-based model?
Some providers of dynamic pricing recommend price increases that take place a certain number of days prior to the trip date (e.g. 20, 15, 10 and 5 days prior). Others use models that raise prices as demand increases, using limited quantities of tickets at distinct tiers that move up as tickets are sold. If price increases occur in set time increments, you run the risk of raising prices when demand isn’t there. With quantity driven pricing, price only increases with demand, meaning that you won’t be underpriced with high demand, or overpriced if demand is low. In addition, prices can rise across several price tiers within one day. Quantity-based strategies also provide beneficial communication opportunities with the customer by creating urgency messages with the number of tickets remaining at a given price (e.g. “3 tickets remaining at $19.99!).
5. Do you recommend that prices ever go down?
An important part of selling online is influencing customer behavior in the long term and training your guests to buy tickets as early as possible. The customer trades price for risk, and your business is insulated against the effects of bad weather and other factors that may cause a customer to change their mind. If, however, prices are dropped last minute, customers are no longer trained to buy in advance, and you lose the financial and operational predictability you sought with dynamic pricing. In the long-run, customers may wait to buy if they think you might cut prices later on.
And one last plug for quantity-based models: if bad weather is forecasted ~1 week before a trip date, lower demand will automatically keep prices in lower tiers, which might still be a short-term incentive for some guests to buy.
No matter who you choose as a pricing partner, be sure to understand the answers to these questions and decide which approach works best for your business. Contact us at partners
@catalate.com today to learn more about how to choose a pricing provider that will help you sell more online!