Beyond demand: The hidden influence of pricing on your (re)venue
The entire experience economy has been forced to transition. Many attractions and venues have faced a very challenging shift from selling mostly offline to selling up to 90% of ...
Whether we have little or much experience in the attractions industry's sales department, we are undoubtedly confronted with the importance of pricing strategies and their influence on the attraction business. Often, the first thing that comes to mind is: "Yeah, I know prices influence demand," and if you have read our blog about price sensitivity where we discuss 9 key factors for your pricing strategy, then you may follow this up with: "And, of course, there are strategies and factors we should incorporate and consider."
And indeed, there are several great strategies that may suit your attraction, like a tailored suit. We ourselves are the greatest fans of dynamic pricing strategies and sowing you that suit by getting to know your customers and incorporating this data into your pricing strategy. But before you get into the specifics and join the Dynamic Pricing revolution with our starter pack, let us tell you more about another one of the many hidden influences of pricing.
Just as with many things in life, with pricing, there is more than meets the eye. Beyond demand, value perception, and also positioning against competitors or substitutes, pricing also strongly influences consumption.
Looking closer at how prices influence consumption, according to John T. Gourville and Dilip Soman of the Harvard Business Review, researchers found that pricing tactics which mask rather than highlight prices to boost demand and sales actually reduce the pressure to consume the purchased service or product because buyers are less aware of the money they spent and the worth they should receive in exchange. Additionally, if this purchase takes place much in advance, your customer will most likely lose sight of the initial spending. When a buyer, however is well-aware or gets reminded of their spending for an experience or product, they tend to feel more compelled to make the most out of their purchase. This is called the sunk-cost effect. Sounds reasonable, right?
Take a season card, for example; you set a competitive price with all eyes on driving pre-season demand and generating first revenue to kick-start the season. And then? You have generated revenue - Great! Actually, it is one-time revenue - still good! But what if they use the season card only a couple of times? Not so good. One may ask now: "But why is this important? I have already generated revenue with this sale."
Let me break down for you why consumption is vital for your venue:
Chances for a two-part revenue stream
This one is easy: The one-off win is small compared to all the chances of revenue you gain when the season pass or a single ticket is used and the service you offer actually consumed. As you may know: Food & Beverage and merchandise can make up to 30% of revenue, and every visit, every time a customer practices consumption of their purchase, you get a new chance on driving in this revenue.
Consumption goes hand in hand with customer retention & satisfaction
Whether it is a single visit or multi-visit ticket, one of your goals should be to drive customer satisfaction and retain them so they won't stay a one-off buyer. To do that, your customers need to experience your offers because how else would they turn into a fan that comes back? And this is logical: A customer who visited your venue five times will most likely be easier to keep and maybe turn into a loyal fan equipped with a season pass than someone who bought a ticket once but turned out to be a no-show.
Consumption is directly linked to the retention rate and customer satisfaction because every touch-point of their consumption experience, including every ice cream they buy, every ride they go on, and every visit that slightly differs from the one before, provides you with a new opportunity to make them happy. More consumption = more touch-points to drive satisfaction actively, and if happiness is high, retention is likely to increase as well.
How to this to your advantage and drive consumption with pricing
Now that you have this knowledge and know the hidden influence pricing may pose on your overall revenue and customer satisfaction, and retention, it is time to give you the tools to act on it.
Here are two simple but powerful tactics:
1. Break down & display prices
We know, offering a family bundle, for example, is intriguing at the point of sales and great tactics to boost it. Still, considering consumption, it hides away the worth of each item, reducing the awareness of its value. But this doesn't mean you need to unbundle your items and abandon your bundles forever. Instead, you could display its content at a second step of the sales process or after purchase, showing or even striking out the prices allocated to the tickets when bought separately. For season passes, you could start counting the usage and show the growing amount your fans have saved with every visit.
2. Use digital & analog tools
Another easy way to improve consumption is a pre-event email reminding them about the visit, its monetary value, and all the great experiences ahead. And the same counts for season pass holders: Why not inform them about news and drive their interest to use their golden ticket to your venue? You could spotlight your most famous attractions, your food, or your mobile app providing access to everything needed for the perfect day on the go.
Once your visitor walked through your doors, you can promote Food & Beverage and merchandise further with offline and online promotions. You can place posters around your venue's walking route, on Information panels and waiting areas. If you have a mobile app at hand, you can use timed or location-based push notifications proposing lunch or coffee breaks. At this point, you can get creative and take many routes, but no matter what: You should act on this opportunity since it is a simple yet extremely efficient way to drive consumption.
Before you go and use your new knowledge, here are two factors to keep in mind:
- First, timing is key. Even the greatest tactic or idea will not flourish if the timing isn't right. Your customer does not want to receive a pre-event email for tomorrow if they have already rescheduled their visit to another day. And they probably won't appreciate a tasty burger menu ad at 10:00 AM. The same counts for pricing; at first sight, they may be more intrigued by bundle offers or a season card because their attention may be on saving money in the long run, but once the item is purchased, they may put more worth into it and welcome usage enforcement if they are reminded of its monetary value once in a while.
- Secondly, you need to break free from assumptions. It is essential that you gather information on your customers and their behavior to act on them efficiently. Make sure not to waste targeted efforts on assumptions that won't hold up.
How will you know if assumptions are correct? Test - gather data - learn - repeat!
But this is a relevant topic for another blog. If you want to stay updated on actionable insights around pricing, boosting revenue, receive best practices and news all around the attractions industry, subscribe to our blog now!
Convious, the leading eCommerce platform for the experience economy, launched this week their Mobile Food Ordering solution. With Convious’ Mobile Food Ordering technology, visitors can now.