Pricing strategy has always been one of the most important components of any business’ success. Operating in a COVID-19 world illuminates this further, and also presents a number of considerations for business owners as they re-open to the public.
In this post we’ll spend some time highlighting a framework for reopening. While this content focuses on the unique characteristics of a ski area, the approach can be used for most high-volume ticketed businesses. Operators who use this crisis to shift consumer behavior will emerge with much stronger businesses than pre-COVID.
One of the hardest things for any operator right now (not to mention, person), is the uncertainty in the path forward. Most people have good ideas as to what “might” happen in these uncertain times, but we’re all doing some amount of waiting-and-seeing as to how those ideas play out. We won’t have the answers to all of these questions, but it is worth putting some of them down. Below is a list of questions we’ve heard in ski, parks/attractions, and from our employees about the future. This list is hardly all inclusive, as many organizations are grappling separately with how to handle staffing issues, closures, public scrutiny as to operating procedure, etc.):
- Will I have government mandated capacity constraints?
- Should I choose capacity constraints if they aren’t mandated?
- How will capacity constraints alter my presale and pricing strategy?
- Will capacity constraints mean it is easier for me to sell in advance?
- Will uncertainty around COVID make it harder for me to sell in advance?
- Will COVID shift demand such that I am more likely, or less likely to hit capacity constraints?
- Do I want to pre-sell all of my business?
From a pricing/selling perspective, our guidance is to set good goals, one of which is to prioritize control and the ability to change approach as our operating season arrives.
Big Step Forward in Pre-Sale/E-commerce
Moving towards e-commerce is a trend that is fundamentally good for operators. Reinforcing that movement, either by requiring advanced ticket purchase, or simply suggesting pre-purchase, reinforces the shift from offline to online. We’ve always believed that this is a good step for businesses of any scale, as it increases predictability, control, and the ability to alter strategy as data becomes available to maximize revenue for each day. As businesses move towards 100% online (or close to 100%), how well they run their e-commerce businesses will be one in the same as how well they run their day-to-day operations. Both pricing decisions, and how well operators manage their e-commerce funnels become more important.
Broad Stroke Pricing Strategy Considerations
While every operator’s situation is going to be unique as they reopen and operate during COVID-19, we have several pieces of guidance on pricing that we see as fundamental to maximizing revenue and growing predictability:
- Treat every day and product as its own opportunity, and price them as such
- Build pricing strategies that reinforce the consumer behavior you seek, that deliver on the marketing messages the consumers receive
- Build pricing strategies that allow the customers to understand “if I don’t buy this now, it will be more expensive later”
- Afford yourself a high “reference price”, such that consumers understand the value of the price point in front of them, and your pre-sale rates can flex upwards during periods of high demand
- Ensure the strategies you use afford you the control to amend them when the unexpected happens (which will definitely happen)
To that last point, we’ve always known that quantity-driven dynamic strategies are more efficient than time-driven strategies and are even more important in an uncertain operating environment. Quantity-driven strategies ensure that when you need to adjust your pricing strategy, you have much more control to do so.
With a quantity-driven strategy (where each price point has a limited number of units), demand forces prices up in the case that your products should ever start underpriced. With a time-driven strategy (price points move upwards on specific dates), you are at risk for over-selling price points or needing endless manual manipulation of strategy. In instances of overpricing, a quantity-driven approach allows prices to “stall” until demand increases to move price points upwards. With a time-driven strategy, prices may move up in the absence of sufficient demand, limiting both revenue and yield output potential (or forces an internal strategic shift that angers customers if you then re-drop prices).
After defining goals, and settling on a strategy to achieve those goals, measurement of relative success is essential. At this point, you should consider what tools you have available to measure the success of your strategy. No matter the scale of your business, there are some tools at your disposal that are universally available, like Google Analytics, which you can use to measure the most critical metrics in the e-commerce funnel.
These topics are challenging during “normal” times, and our current reality doesn’t make it any easier. Thinking about your fundamentals as a business and what pricing genre is right for you, while considering how our COVID reality impacts your business specifically, should mean you are well on your way to making the most of this crisis. And if you afford yourself control, you’ll be ready for the inevitable changes coming your way next.
Want to learn more about how a tailored pricing strategy can help you sell more online? Reach out to email@example.com to learn more.