Demand for outdoor experiences is particularly high as customers reconnect with friends and family after pandemic lockdowns. More customers are once again looking for the thrill of swooshing down a mountain on a powder day or racing down their favorite water slide.
Still, pricing remains the primary driver for whether or not a potential customer converts into a guest. The shift to online sales that was accelerated by the pandemic is an opportunity for ticketing businesses of all types to assess their pricing strategy to capitalize on high demand. Customers increasingly buy online for convenience and to access the best price by purchasing ahead. The expectation is that their experience will be more seamless when they arrive, for example, by avoiding long queues at the ticket window.
So, how can resorts and attractions leverage the shift to digital to yield more revenue? Part of the answer lies in optimizing your pricing strategy through the use of dynamic pricing.
The benefits of a dynamic pricing strategy are two-fold: it encourages customers to purchase in advance to obtain a lower price. Then, it enhances your e-commerce business by driving incremental revenue and helping you to better predict guest volumes, which in turn benefits operations. With dynamic pricing, even a small increase in price can have an outsized impact on profits if costs and sales volumes remain constant.
Before taking steps towards getting your pricing right in 2022, be sure to consider the following questions:
- “Does the product I am selling look more like an everyday ‘activity’ or a one-off ‘event’?”
- “How regularly do people consume my experience?”
- “How constrained is my inventory? Does my business sell out regularly?”
- “For how long do people consume my experience?”
For example, are you selling what is a once-in-a-lifetime event for most customers, like a World Cup Final, or tickets to a water park that’s open every day? Or, are you selling skydiving jumps which only last a few minutes, compared to lift tickets that are good for an entire day?
Now that you’ve defined how your unique business or experience might influence your dynamic pricing strategy, here are seven tips to set you on the right path forward:
1. Start by defining business goals
First, you need to clearly define your business objectives and determine what you’re trying to achieve. What has changed about your business in the previous year, and how will that impact your goals? This is also a good time to understand your customer segments. For example, are there longer purchasing lead times for customer groups traveling from different regions or countries? Understanding these nuances may help with future pricing and marketing investment decisions.
2. Continue with data and analytics
Data should be the foundation for every pricing decision you make. Use historical ticketing data to get detailed insights into customers’ buying behaviors to see what products were sold and when, at what price, and through which channels. This could help you see, for example, that customers are willing to pay more for tickets at certain times of the year. Price increases around that time period likely wouldn’t affect demand. Data can also be used to understand your performance relative to similar businesses in your industry and/or region.
3. Understand potential pricing strategies
Keeping the frequency, duration, and capacity constraints of your experience central to your decision-making will help select the strategy that best aligns with what the data (from above) is telling you.
Here’s a brief summary of common pricing strategies:
Dynamic pricing: Prices vary based on the day and/or time slot, and prices increase for each day over time based on demand. This is the most effective strategy to increase advanced sales.
Variable pricing: Prices vary based on the day and demand. Prices do not move over time for a given day.
Static pricing: Price remains constant from day to day.
4. Price every day and product as its own opportunity
Think about each product and day as its own opportunity and price it accordingly. Although it may seem obvious to price experiences differently relative to their value to the customer, it’s less obvious to think about when a customer purchases as a component of this strategy. Companies that can best execute this strategy view a customer buying 40 days in advance for a specific date as buying a different product than someone buying the same date, two days in advance. Therefore, these two customers end up paying different prices.
Being consistent with pricing by starting low and moving up helps make customers feel that they’re being treated fairly, which increases confidence and leads to increased conversion rates.
5. Decide what success looks like and how you’ll measure it
How will you measure and track performance? And what does success look like in the near, medium, and long-term? Even without a complete data set, simply tracking a couple KPIs such as online conversion rates and gross revenue can illustrate the positive impact that dynamic pricing has on your business. E-commerce systems that are more sophisticated may provide ratio metrics such as demand capture, percentage of dated searches that yield a transaction, revenue per search, or the value per date-specific search. Demand capture and revenue per search tend to provide the best insights into pricing efficiency opportunities that make up total e-commerce conversion rates.
6. Invest in customer confidence
Strategies like dynamic pricing aren’t about maximizing short-term revenue – they’re intended to grow long-term revenue. They’re also a way to invest in future customer confidence. Comfort levels with buying online are directly influenced by confidence and brand equity. Through dynamic pricing, you’re increasing customer confidence by showing guests that buying early is how to lock-in the best price. In turn, customers won’t search for discounts and will feel reassured that there’s no better price in the market through any channel than what appears on your direct website.
7. Have a communication plan
Be honest and transparent about your pricing and the benefits of buying in advance (lower prices) versus walking up to a window and paying more. Clearly define how and where (your website) customers can buy the lowest priced ticket. Selling the same product or experience for different prices isn’t discounting or surge pricing. Rather, it’s understanding the value of your product offering and aligning that with the willingness of your customers to pay for the experience at a specific point in time. Once you’re comfortable pricing up to the top of your range, you can be more comfortable pricing down to the bottom of your range.
Above all else, flexibility is key
An effective pricing strategy will reinforce the purchasing behavior – buying online and in advance – you are looking for and should align with your marketing messaging. Dynamic pricing also offers the ability to change prices when the data show they’re not working to achieve business goals. Getting comfortable with sometimes being wrong is a mindset that every ticketing business should embrace to quickly pivot to a new strategy to maximize revenue.