Some things are priceless, but for most of the others… price is pretty important. As one of the four P’s of marketing, price is a deciding factor in business and in many other everyday decisions. It can be an indication of quality and define the value of your product or offering, it can make or break the deal and it can even influence relationships. Price determines profitability – whether it is the one at which you buy or the one at which you sell. Quite a powerful tool! But when I learned about variable pricing, it made me reconsider the way we think about prices – even when they’re thoroughly researched and strategised.
Imagine having the same product but at variable pricing. Not to be confused with seasonal pricing, variable pricing, according to the dynamic Stephanie Schaub* of Chocoversum, a chocolate museum in Hamburg, depends on a variety of everyday factors. In her case, that means lead time of the booking, the day of the visit and the starting time of the tour. Of course not all business models work on these principles, but what I found most interesting is the reasoning behind having flexible or variable pricing. A possible nightmare for accountants, logistics departments and those developing online or ticketing systems, there are some reasons for this type of pricing that are relevant across most industries.
Variable pricing is guest or customer focused. Consumer trends show how important customer experience and expectations are. Having an accommodating price is one of the best ways to confirm your customer focus. Variable pricing offers stability for the frequent guest (like tour organisers), an option (be it more expensive) for the time-sensitive guest and another option (perhaps at a less popular time) for the price-sensitive guest. But variable pricing is not only about pleasing your customer, it makes economic sense for your business too. It ensures that you have turnover regardless of the season, weather or time of day and it serves as a very handy planning method.
This model seems ideal for the tourism, entertainment and hospitality industries. And although it might be better suited to a business in the city centre or a busy spot, having such flexibility when it comes to your pricing can definitely entice visitors to come at times when business is slow or when you are slightly out of the way. It can also help you manage numbers and the quality of your experience during peak times. And what a handy tool to manage guest numbers in these crazy times of social distancing and Covid regulations. Being open to various pricing options can ensure growth in tough times and it makes you less vulnerable in times of super bugs or cyclones.
Price flexibility does not mean that you can ignore research and strategy though – they’re even more important. Rather than establishing one fixed price, you have to establish a few. Although Stephanie Schaub took on a refreshing new idea with variable pricing for their chocolate tours and steaming mugs of goodness, her steps for implementation hold traditional truths important for any business. From setting targets and finding the best team, to talking to experts, winning the trust of shareholders and empowering yourself with the best service providers. You also have to make the most of data analytics, fine-tune your communication strategy and then of course – go online.
Is variable pricing only relevant for tourism and hospitality industries? I think not. Variable pricing addresses the most urgent consumer trend – giving customers a choice. Regardless of your industry, whether you sell tyres or art, there is always someone willing to pay more for priority service and another happy to sacrifice a little convenience for a more affordable price. Considering variable pricing in your unique circumstances might just help you to survive, to be less dependent on seasonality and good weather or to rely less on rush hours. It takes some careful planning, some clever thinking, probably some help with systems, but it might just put control back into your hands.
Some things in life are priceless – your health, your wellbeing, time with your loved ones… But in most other situations, price is something that needs careful consideration. Price is powerful!
*Stephanie Schaub shared her thoughts as part of a recent AAVEA (African Association of Visitor Experiences and Attractions) virtual conference.