How leading retailers use price to drive more than just revenue
Many leading retailers leverage price across verticals to enable successful strategies that could equally be applied in an airline context.
Successful retailers understand that while price is important, it means nothing on its own. An offer ties the product, the price, the value proposition, the customer and the retail context together.
While identifying the right price is key to maximizing revenues and optimizing margins, it can also be used as a lever to influence other important aspects of the business:
* Price as a revenue driver: Increasing prices when demand is strong, and running a promotion when demand is weak; a basic form of dynamic pricing strategy.
* Price as a customer experience driver: Disney’s theme parks use dynamic pricing to impact the customer experience, applying high prices on peak days and discounts off-peak. All customers have a better customer experience with shorter queues, better value for their stay, and more time spent spending more money.
* Price as a lever to control supply and demand: This is common in the consumer power industry where dynamic pricing is used to dampen demand at peak times, on toll roads to manage peak traffic volumes, and at Uber which uses surge pricing to match demand with supply.
* Price as a lever to create a winning business environment: In Major League Baseball in the US, ticket prices will vary based on stadium location, weather, team performance, quality of the opposition, and more. The League has improved its attendances particularly for less popular games. This has resulted in a better atmosphere generated by larger crowds, leading to higher revenues, rising league positions and more high-demand games in contention as the season draws to a close.
As we can see from these examples, dynamic pricing is an effective way to improve lots of common key performance indicators within a business above and beyond the typical revenue-generation use cases.
And all are relevant to airlines, as they strive to manage the finite supply of lounge space, airport check-in areas and premium on-board seating. All these products can be managed through dynamic pricing strategies to guarantee supply for their most valuable customers.