- Understanding of Your Strategic Goals
Dynamic pricing can be the lever that addresses numerous business goals. For instance, if you are an attraction that wants to mitigate overcrowding on weekends and holidays, dynamic pricing can influence guests to come on less crowded days. Or, if you are a retailer who is consistently challenged with having too much clearance inventory, dynamic pricing can be used as the lever to maintain a high inventory turn rate while maximizing gross margin. Whatever your objectives, dynamic pricing can heavily influence your desired outcome, but the strategic objectives need to be clear from the start.
- Data, Data, and More Data
Data is the fuel that powers a dynamic pricing algorithm. It provides actionable insights for pricing decisions. The more relevant data is made available to the algorithm, the more accurately the algorithm will help you achieve your strategic goals.
In the case of attractions this data can include occupancy limits; historical attendance; historical pricing; historical revenue; types of tickets sold (such as General Admission or VIP); membership or season pass information; and budget goals. For a touring musician, the input data might be different. It could include the tour’s sales data; venue’s sales data; venue seat maps; historical sales from previous tours; tour marketing plan; and revenue goals for each performance.
Whatever your business or industry, the more data you have available, the better dynamic pricing can analyze and apply data insights to the accomplishment of your business objectives.
- Supply and Demand Fluctuation
Industries such as airlines, hotels and online retailers (like Amazon) have used dynamic pricing for years. A recent Wall Street Journal article discussed the expanding use of dynamic pricing in a variety of industries. The article featured a zoo, toll road, bar, ski resort and in-flight internet. What do all these businesses have in common? They have supply and demand fluctuations. As you think about your business or industry, what are your supply and demand fluctuations? Dynamic pricing will allow you to understand and act on these variations.
Dynamic pricing can impact just about every business and industry. As a first step on the road to success, understand your strategic goals, data availability, and supply and demand fluctuation. Then find a trusted provider and discuss your fit for dynamic pricing.