By using the Smeetz software to manage your bookings, you can apply dynamic pricing to your events and activities. A principle already applied in many industries, Smeetz makes it accessible to leisure organisers.
What is dynamic pricing?
This pricing method allows you to continuously adjust the price of your activities according to several parameters in real time. These parameters change depending on your industry.
You can simply adapt your prices according to supply and demand, or the filling rate, the remaining time until the end of the sale, the weather, the time of day, of the week, of the year, etc.
Sometimes, when the demand is high, the objective is to sell at the maximum price accepted by the demand. At other times, when the demand is low, the objective is to sell the remaining stock by reducing prices. However, the main objective remains to maximise income.
Indeed, giants such as Walmart and Amazon have seen their income grow thanks to the application of dynamic pricing.
Using this pricing model, [Walmart’s] global sales grew by 30% in 2013 and the trend continued in 2014 as well. Amazon also saw a 27.2% increase in revenues and ended up as one of the top 10 retailers in the US for the first time.
This pricing method allows you to take full advantage of your customers' willingness to pay. And this willingness is not fixed, hence the dynamic pricing.
Instead of having a single fixed price, you can take control of your pricing strategy. Dynamic pricing has the ability to increase a company's profit margins if used correctly.
In the graph below, you see the customer demand in blue. It varies from month to month and is highest during the summer. In this example, there are three organisers who offer three different fixed prices for their activity: $140, $180 and $220.
- The one with the lowest fixed price will have customers all year round, BUT he will leave a lot of money aside during the high season, because he could have increased his rates without losing in filling.
- The one with the average fixed price will have customers from May to November, so an average occupancy rate.
- And the one with the highest fixed price will have customers at a very advantageous rate between July and September, BUT during the low season, because of its high price, it will have a very low occupancy rate.
None of these three organisers maximise their profit by keeping their price fixed. With a variable and adapted to demand price, they could meet total demand and obtain an optimal income, which corresponds to the air under the demand curve.
Is it common to apply dynamic pricing to leisure activities and events?
Not at all. You are surely used to this concept with airlines, hotels or large e-commerce platforms. If I tell you EasyJet, Ebookers or Amazon? You think, well, yes! Every time I look at one of their products, a new price is displayed.
Or simply think of supermarkets that lower the prices of food close to their expiry date or bars that offer Happy Hours. It is also a way, albeit manual, of adjusting prices to optimise sales.
Airlines have been using dynamic pricing since the 1980s. So, this is not a recent discovery. However, one question remains: why could some industries do this and others not? If you sell a product or service online, dynamic pricing is quite accessible to you too.
Recently, some Swiss ski resorts have chosen to apply this method with great success. For example, if the weather is bad, subscription prices decrease. Or, by booking in advance, customers benefit from a better price. In this way, customers also benefit from advantageous conditions. For the organiser, this allows for better predictability and the smoothing of demand over time by avoiding peaks in demand that are more difficult to manage. A ski resort in Corvatsch, Graubünden, saw its turnover increase by 5% this past season (RTS info, broadcast 12h45, 23.04.2019).
In reality, the specificities of industries that use dynamic pricing are very similar to those of leisure activities or events. Among other things, limited quantities, periods with high or low demand and a marginal cost for an additional unit close to zero.
You may already be applying dynamic pricing concepts without knowing it, such as promotional codes or limited offers. With Smeetz, the entire process is done automatically and the optimal price for your activity is applied immediately. This saves you valuable time, as you no longer have to change your prices manually.
How does it work?
You define a maximum and minimum price and the Smeetz algorithm adapts your prices in real time to maximise your income. The price displayed for your activity is calculated based on the variables selected together.
If you create all your activities on Smeetz, we know your final stock and can use your booking data to consolidate our algorithm.
If you do not want your image to be affected by this price fluctuation, you can only allow dynamic pricing on our Smeetz.com platform.
What if you are not yet convinced?
We can define a precise pricing strategy together and give you all the necessary advice. You will learn by starting with narrow price fluctuation bands, before you can expand them.
Want to talk ?
Contact us to discuss a future collaboration:
- By phone: +41 21 588 17 12
- By email: firstname.lastname@example.org
- On our website: pro.smeetz.com