In the attractions and activities space, the term Dynamic Pricing has received a lot of attention lately, but may still be a mystery to some. Simply put, dynamic pricing is an approach to pricing – enabled by data and technology – that continuously adjusts prices based on demand, season, day, time of entry, and especially when customers buy.
In the resort and activities space, dynamic pricing typically refers to the price of tickets or admissions, but flavors of revenue management pricing have been going on in the airline industry since 1985. Just think of how airline ticket prices change week over week, or even hour over hour, during the research process. Dynamic pricing has since been adopted by other leisure tourism sectors like hotels, car rentals, cruises, and more. Today, it’s being adopted by activities and attractions as well.
The Upsides to Dynamic Pricing for Attractions and Activities
Dynamic pricing benefits resorts and attractions in several ways:
- Provides operators with tools to influence consumer behavior to off peak times, and helps them maximize revenue and predictability for all operating days.
- Improves the conversion rate of the online shopping experience, by offering the right price at the right time, and aligning advanced commitment to the price paid.
- Increases predictability for revenue and ticket sales which helps to optimize and improve operational efficiency
When a ticketed attraction or activity business decides to implement dynamic pricing, it needs to consider the implementation options that will be best for them. These include self-implementation, working with a consultant, relying on software for optimum dynamic pricing, or a completely outsourced solution. Implementing and achieving the benefits of dynamic pricing, however, demands a deeper understanding of the tools, skills, time, and information available.
Options for Implementing Dynamic Pricing: Pros & Cons
1.Do It Yourself
Ticketed attractions or activity companies that choose to use in-house staff to implement and manage dynamic pricing have the benefit of bearing no cost other than employee time. If the business has a great Revenue Manager who can devote time to testing dynamic pricing, the DIY approach might be a good option. Another pro for the DIY approach is that it can give the company the ability to test out dynamic pricing and gain confidence that they should further expand their use of and/or investment to handle dynamic pricing.
On the other hand, businesses have to first understand that dynamic pricing does not depend on a business’s human talent alone. By its very definition, this method of pricing is dynamic, meaning changing rapidly, even sometimes in real time. To accomplish this, a dynamic pricing system needs to ingest critical data.
Despite the talent and best intentions of internal sales or revenue management teams, it becomes challenging to execute a pricing change at the precise right time without a powerful, data-driven pricing platform. Individual teams are oftentimes limited by the tools the company employs and the extent of their own first-party data.
It’s challenging for any in-house team to produce optimized results, unless that team’s perspective is also informed by third party, industry-specific data beyond that which is generated by the attraction alone.
PaaS (pricing-as-a-service) platforms, such as Catalate, provide access to years of resort and attraction pricing and performance data that, when applied to pricing strategies, positively impacts the outcome of revenue results. Without access to this kind of external data, any revenue manager would have a hard time knowing what levers to pull to generate desired results.
2.Hire an Outside Consultant
If a ticketed attraction or activity lacks in-house teams to optimize revenues, they may seek external talent such as a Revenue Manager consultant to assist them. Experienced consultants can solve for the internal lack of internal skill sets and time. The business may also realize a cost savings in hiring a consultant over hiring a full-time Revenue Manager.
The consultant would also be hired exclusively to focus on dynamic pricing as opposed to the many varied projects, priorities, and directions into which the in-house Revenue Manager may be pulled. Lastly, the company and any employees who work directly with the consultant, will gain knowledge that can be applied for the company’s benefit down the road.
Outside consultants still face limitations. The consultant may be a knowledgeable revenue manager, but if the company’s software does not also offer sophisticated pricing controls and implementation, he or she may be limited in providing optimum solutions by the company’s tools or its data set.
For example, a consultant may know how to execute a dynamic pricing strategy, but if the attraction’s e-commerce software cannot properly ingest key data points and merchandise products to a potential customer, the consultant’s expertise becomes less valuable. Or, if the business only has a first-party data set, it limits how far the consultant can go in truly optimizing revenue.
3. Partner with a Product Company
There are really two kinds of product companies. Both are software providers but the first type may only have one key solution versus a suite of solutions aimed at achieving a particular goal.
Software companies that exclusively sell built-in pricing solutions do have good revenue management capabilities because that’s their focus. But they may otherwise have limitations.
Solutions suite providers like Catalate that pair e-commerce engines with pricing services bring even more to the table. In this scenario, the business’s pricing strategy deployment comes directly out of the e-commerce platform itself, and the platform is constantly iterating to improve. The e-commerce engine already houses all the prices that will be charged for all the respective products sold by the resort or attraction operator.
The e-commerce engine also brings even larger data sets to the effort – it collects all the transactional data necessary to implement and optimize a dynamic pricing strategy on an ongoing basis. This may include:
- What did customers buy?
- On what day of the week did they buy?
- How far in advance did they buy?
- Did they respond to any inventory constraint messaging (“only 5 more tickets left at this price!”)
- Were they offered an upsell option or product bundle and did they convert?
- How frequently do they buy?
- What is the average order value?
- What is the overall conversion rate?
With all this internal and external data aggregated, readily available, and built into the e-commerce engine, the manual efforts of an internal revenue manager diminish significantly. If using this type of e-commerce solution, attractions may not even need an experienced or dedicated revenue manager, and the time it takes to implement and optimize a dynamic pricing strategy is significantly reduced.
Furthermore, e-commerce + pricing services solutions providers work across many different businesses, which can mean benefits such as…
- A network effect that accelerates continuous improvement cycle of the pricing model;
- Network-wide comparisons of relative performance of key metrics to be tracking when it comes to online sales. These metrics are even more powerful when there is a large network of data for comparison.
As may be evident by now, the software company that only sells built-in pricing solutions cannot bring a complete solution to bear. If they do not have built-in e-commerce tools, their dataset is not controlled or standardized.
When an attraction has an existing or separate e-commerce engine that merely plugs in a pricing solutions provider, the pricing dataset cannot sync with the data provided by the e-commerce engine due to the lack of a wholly integrated solution. The efficacy of these outside pricing solutions can also be limited by the existing e-commerce engine’s capabilities. These are not ideal situations to reach optimal results.
To learn more about how Catalate’s Cloud Store and Pricing as a Service (PaaS) products can benefit your business, schedule a demo today.