5 ways dynamic pricing can help leisure fight COVID19
Uncertainty paved the bumpy road that we all staggered through this past year, and although we’ve made it past the finish line and into a new decade, predictability still seems nowhere to be found.
In such an unstable context, dynamic pricing seems to be posing an interesting solution to all the uncertainty-packed challenges that leisure managers are trying to navigate these days. We want the world of leisure to thrive as much as you, so in order to support leisure brands that have been straining their brains this past year in order to find more stability, predictability, and certainty around their businesses, we turned to Paul Klyvis, Chief Data Scientist at Convious, and Convious COO, Adriaan Van der Hek, with the hope that they would help us shed some light into the ‘how’ and ‘why’ of this matter.
And luckily, they did.
|Paul is a data-scientist expert and company leader with over 15 years of well-rounded experience in the field. He is knowledgeable in a wide range of research topics such as Behavioural targeting, Personalisation, Real-Time Bidding, or Decision Intelligence, and applying them in order to build data-driven products and services.||Adriaan has been working for high traffic websites and platforms since 1997. He accumulates years of extensive management experience in retail, travel, health, beauty and leisure, and specializes in Sales, Marketing and Operations in B2C & B2B markets.
He recently hosted a webinar on how dynamic pricing can save your season
In their most recent interview, both industry experts shared their most valuable insights, takeaways, and advice on how dynamic pricing can be a fantastic solution to help your leisure venue fight COVID19.
So if you are looking for a quick and easy way to heal your leisure venue’s 2020 performance, read on, because we have listed 5 ways in which dynamic pricing can help you fight COVID19 and increase the predictability of your revenue, sales, and overall business growth.
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3. It helps you increase your conversion rates and fill in your venue, by reaching a wider audience.
4. It helps you improve your visitor spread and distribute your demand, which results in less overcrowding in your leisure venue.
1. It helps you adapt to change and increase predictability.
First things first, we’re hearing more and more about ‘dynamic pricing’ in the industry lately. We know big parks such as Disney are greatly benefiting from it. But what is, dynamic pricing, exactly?
Dynamic pricing, also known as ‘surge pricing’ or ‘demand-based pricing’ in some cases, is a flexible pricing strategy that allows businesses to dynamically alter their prices based on different market conditions.
However, there are many forms that dynamic pricing can take; Paul Klyvis explained it best in one of his former interviews; check out this related read if you’d like to have a more in-depth understanding of dynamic pricing and its different forms.
How is dynamic pricing helping leisure businesses adapt to the current uncertain future?
Paul: Well, one of the main issues that COVID19 has brought forth is a huge amount of uncertainty. When COVID19 struck, it brought along many unexpected changes - from regulations, to changed customer behaviour - and along with that came unpredictability, which has been one of the biggest enemies for businesses, because it presented major obstacles in planning for the future, planning their resources, staffing, communication campaigns, opening times, revenues, events, capacity, and well, in the end... their overall strategy. And so, in that context, dynamic pricing is one of the technologies that can help leisure venues adapt to this uncertain future.
It uses predictive analytics and machine learning techniques to make accurate predictions and forecasts about what is coming up, and helps them adjust pricing in an automated way, by taking into account a number of factors that are continuously and rapidly changing (even more so now), in the market.
So, in conclusion, dynamic pricing can help your venue fight uncertainty and gain better and more accurate predictability, which is of utmost importance when it comes to determining your success and survival in times of crisis.
In the end, your chances of withstanding the hits from any future COVID wave are increased as you become more dynamic. By being more flexible, you can dance along with the music, and adapt to these ever-changing circumstances more swiftly.
Dynamic pricing systems is one of those tools that businesses can use to be more certain about the future, to have better (and more predictable) revenues, and better analytics on margins.
- Paul Klyvis
In order to illustrate this, Adriaan Van der Hek shares with us the following anecdote:
This girl that I know baked cupcakes and was selling them each for 2€. She made a little bit of money out of it. Then an unexpected event occurred: A famous blogger made an order for a couple cupcakes, and then made a post on social media saying how much she loved them. This simple action resulted in the orders for cupcakes skyrocketing the next day (1000 orders!), which this girl had to make (throughout a very long day of baking) and sell at 2€ a piece, which was the original price that was stated on her website.
She learned from this however, and increased the pricing of her cupcakes to 3,95€ the next day. But she couldn’t help to be bummed about the fact that if only she had been able to act swiftly and predict that increase on demand, she could have sold all those previous 1000 cupcakes from the previous day at that higher price and have way more profits!
The morale of the story is simple: She responded too late, which resulted not only on a crazy amount of workload for the insufficient resources and time that she had allocated, but more importantly, a lost revenue opportunity.
With the implementation of automated dynamic pricing, we prevent this from happening in your leisure business. We help you react in real time, to the changes happening in your market, so that no money is left on the table.
Is the perception and relevancy around dynamic pricing changing in the industry? Why?
Adriaan: Yes, it is changing. It is already well established in industries such as air travel, but the leisure industry is slowly picking up as well, where we’re seeing a spike in demand on dynamic pricing solutions.
Originally, dynamic pricing was born in a highly competitive environment where margins were low. Until now apparently competition was low and margins were high in the leisure industry, but COVID19 has completely changed that landscape.
Higher competition and low margins are the struggle of almost every leisure business at the moment, which is leading them to adopt new ways of generating income quickly, such as dynamic pricing.
2. It's a quick and easy way to boost your revenue.
Why is dynamic pricing more important now than ever?
Adriaan: Revenue and cash flow have been at its lowest, and leisure venue operators are starting to realize that dynamic pricing is a relatively easy way to make money. It is a quick way to optimize your commercial results, and boost your revenue, up to 20%, 30%, 50% or even more if done correctly, as we’ve seen with many of our partners.
Can you come up with a solution that will deliver such a revenue increase in just a week's time?
Dynamic pricing has been a good and quick extra revenue-generator for those leisure businesses who had this type of pricing strategy implemented, helping them during these times of crisis.
3. It helps you increase your conversion rates and fill in your venue, by reaching a wider audience.
Why do you think leisure businesses were so reluctant to implement dynamic pricing solutions before?
Adriaan: One of the reasons leisure businesses have always been so hesitant about implementing dynamic pricing is that they believed customers were not ready for it. But customers have been ready for a long time. Not only are they used to this type of pricing model in different areas already (they have been using it with airlines for years), but moreover, they seem to have a preference for it, based on the increased conversion experienced in those cases where dynamic pricing has been implemented vs. the original fixed pricing model. Our brains like choice. We all love being able to choose.
In addition, we have to take into account that the impact that the pandemic has had over our economies has also affected people’s purchasing power, and consequently, their purchasing decisions. Many people might land on your website and come to the conclusion that your price is too expensive for them, so they’ll leave. With dynamic pricing you’ll increase your chances of retaining that part of your audience which is more price-sensitive, because you’ll be offering different price-ranges, depending on a wide range of factors (such as for example, having a lower price for your less popular days). On the other hand, you’ll also be able to benefit from those who are least price-sensitive, and who are willing to pay a slightly higher price as long as they visit you on their preferred day.
So, in the end, dynamic pricing will allow you to convert people who otherwise wouldn’t come to your venue, and generate extra revenue from those who are willing to pay a higher price?
Adriaan: Yes, exactly. And that ultimately helps answer the question that leisure managers are constantly struggling with: "How do I fill my venue?" The whole promise of dynamic pricing is that it will help you do just that: fill your venue and bring in more visitor volume (or at least optimize your revenue for the days in which is low).
4. It helps you improve your visitor spread and distribute your demand, which results in less overcrowding in your venue.
You mentioned that demand varies quite a lot in leisure, resulting in peak popular days and slow days. How does dynamic pricing help the distribution of this demand and reduce those peaks on demand?
Adriaan: Yes. This is a common situation in many leisure attractions. The issue is, that if visitor distribution is not balanced enough, it can lead to highly crowded scenarios on peak days, and unmet demand on slower days, resulting in dissatisfaction for both the guests and the leisure business.
This can be easily fixed with the use of dynamic pricing because it will help adjust the prices in accordance with the different factors affecting that visitor spread (demand, availability, weather, traffic, seasonality and so on). By offering different prices for different days of the week, or even different time-slots, you are giving reasons to your audience (who respond differently to different prices) to spread out their bookings throughout your week. Therefore, dynamic pricing presents a proactive approach to influencing your customers’ purchase behaviour, which results in less overcrowding on peak days.
Related read: Price Sensitivity - 9 factors you need to know!
What type of results have you seen in partners’ results when implementing dynamic pricing as a strategy to influence demand and prevent overcrowding?
Paul: Well, I remember a particularly good example of a successful implementation for one of the leading zipline parks in the Netherlands, where real-time-pricing (our own version of dynamic pricing) managed to deliver more consistent visitor spread throughout the days and hours, steering visitors away from peak days and making slower slots busier. They actually had up to 30% fewer visitors on peak hours, while having 50% more visitors on slow days!
5. It's a low-hanging fruit that gives you a competitive edge and the necessary agility to overcome the current challenges.
The COVID19 crisis has been a catalyst that has shocked the leisure industry into change. Now is the time to get your leisure venue ready for a post-pandemic world, which will require agility, high adaptability to change, and above all, flexibility.
Dynamic pricing provides all those three things, helping you fight back COVID19 in numerous relevant ways.
The companies that have come out stronger out of the pandemic are those which have been agile enough to respond to adjust to changes rapidly.
So you can either keep on relying on assumptions and tedious manual work, or you can initiate a transformation towards a data-driven and automated dynamic pricing strategy that will help you become the agile business that the future of leisure will certainly require.
Before finishing our conversation, Paul leaves us with one last piece of advice:
“Don’t be afraid to experiment with different pricing strategies and settings. Because no one knows (not even the brightest business owner) what is the most optimal pricing set-up or strategy for unprecedented times like these. Everything is unpredictable now.
Before, you had the yearly trends, weekly trends, seasonal trends, and other past numbers to base your decisions on. With COVID19, all of that has gone out the window. The game has changed. Which is why it is more important than ever to challenge the rules, and that is done through experimentation, which dynamic pricing allows you a great deal of, in an automated way."
By automating dynamic pricing, you will not only be able to respond swiftly to events happening in your market (such as demand and supply shifts or even a new global pandemic) but it will also help you be compliant by adapting to the constantly evolving regulations that play a key role in your business' survival.
As we have said, in uncertain times, your ability to adapt to changes will determine your level of success. If you are able to move dynamically in this ever changing environment, you will gain a huge competitive advantage and take a leading position within your industry.
Dynamic pricing can be a bit like your first roller coaster ride. Slightly daunting at first: but once you have you first go, you can't get enough of it.
So if you are not educated in the field or lack the necessary expertise, there are different solutions in the market that can help your business optimize its pricing strategies and boost your revenue, such as the one we have at Convious.
Feel free to reach out to the team to request further information or schedule a call with one of our team experts to discuss your venue's goals.