In our discussions with attractions and tour operators we often hear a common set of concerns and misconceptions about dynamic pricing. We’ve written about some of these dynamic pricing myths previously, but here’s an updated list for 2020:
- MYTH #1: Dynamic pricing is about gouging our guests.
We get it. We’ve all had experiences with the opaque pricing strategies used by airlines and hotels and we’ve all been “surge priced” by our favorite ride-sharing services. Not always a great consumer experience! But our approach to dynamic pricing is about alignment, not gouging. That means there are likely to be days when we will recommend higher prices but in most implementations we also find there are many days when our pricing solutions recommend prices that are below the pre-dynamic pricing static price. Plus, we can build your specified price caps and floors right into the pricing solution to ensure our recommendations are always within a pre-defined range.
- MYTH #2: Dynamic pricing will erode community accessibility.
This is a close cousin to the “gouging” myth. For many of our not-for-profit clients remaining affordable and accessible to all members of the community is a key part of their mission so revenue optimization needs to be balanced with this objective. The implementation of dynamic pricing naturally results in offering consumers a much wider array of prices – many of which may be lower than the previous static price. As a result, dynamic pricing can be utilized to meaningfully strengthen an attraction’s community accessibility goals.
- MYTH #3: My guests will be confused/alienated by dynamic pricing.
Fortunately, we have never found this to be true. First, our approach to dynamic pricing provides guests with full transparency on what the price is each day (generally through an easy-to-read calendar or list on your website). Second, while there are many factors that go into determining the optimal price each day we ensure that prices follow a fair set of rules – busier days are generally more expensive, less busy days are less expensive, and for any day, the earlier in advance you buy your ticket the lower the price. Third, as discussed above, dynamic pricing offers your guests greater choice in how much they pay. We have consistently found that when guests are provided with greater choice and control and given the information they need to make the decision best for their families they adapt to the system readily. When done correctly, dynamic pricing is fundamentally guest-friendly. It is possible that the most confusing aspect of dynamic pricing is its name; many of our clients have found the phrase “Plan Ahead Pricing” communicates the guest benefits more easily.
- MYTH #4: Dynamic pricing will cannibalize my membership/annual pass sales.
Interestingly, one of the benefits of dynamic pricing we commonly observe is accelerated growth of membership sales. Why? In general, as prices rise on the busiest days, the perceived relative value of a membership on those days will increase, leading to stronger conversion.
- MYTH #5: Dynamic pricing would force us to cede control to a “black box” algorithm.
It is true that we allow our clients to take advantage of data science that would be impossible for any individual to manage with a spreadsheet. But we take steps to ensure that our clients always remain in control of their pricing strategy. First, we spend time with each new client up front to understand their unique set of objectives and business strategies. This allows us to build certain constraints and behaviors directly into the solution (a simple example being min and max prices) to ensure that our recommendations align with each client’s goals. Second we present all of our price recommendations through our easy-to-use web portal, SEATS. In SEATS clients may, with the click of a button, accept, reject or override our price recommendation with their own price. So our clients will never wake up in the morning and be surprised by the prices on their website!
To arrange a demonstration of our SEATS portal, to learn from client case studies, or to discuss any other questions you have about dynamic pricing, please reach out to us here.