Guest Blog by Beth Evans, Founder & Lead Consultant, Rev Hospitality Co.
Dynamic pricing is a long-embraced strategy in the airline and hotel sectors. However, other service sectors have been slower to adopt, particularly event venues. As a seasoned hospitality professional and consultant, I've seen firsthand the potential of dynamic pricing. In this article, I'll delve into why dynamic pricing matters, how it can be a game-changer for your event venue, and how you can best leverage your event venue management software to drive your long-term revenue goals.
What is Dynamic Pricing?
Dynamic pricing is a pillar of revenue management, the practice of selling the right service to the right customer at the right time and price. The concept of dynamic pricing isn't new. Airlines and hotels have leveraged it for years to adjust prices based on demand. When demand is high, prices are typically high; when demand is low, prices trend on the lower side.
How Does Dynamic Pricing Work?
Dynamic pricing works on the assumption that every customer, regardless of their budget, possesses a degree of price sensitivity. It may feel counter-intuitive, but this in fact presents a unique opportunity for businesses to boost their profits.
Consider the following scenario.
Imagine you own a store selling socks priced at $10 per pair. Daily sales amount to 20 pairs, generating $200 in revenue (a favourable outcome). However, the situation becomes more nuanced when accounting for customers who are willing to pay only $5 for socks, as well as those seeking more premium options.
In the graph below, the area in pink represents the revenue you are generating by selling socks at $10 a pair. The areas in grey represent your unrealized potential revenue, or, the revenue you could potentially generate by selling socks at different price points.
Now observe the same graph, but with a dynamic pricing model applied - the unrealized potential revenue (the areas in grey) has shrunk considerably. By catering to a variety of different customers with different price thresholds, you can capture a wider audience and tailor your offerings to suit their diverse needs. This approach not only maximizes revenue but also enhances customer satisfaction..
Dynamic Pricing for Event Venues
The sock example represents an intentionally simplified illustration of a process that, in reality, is intricate and demands considerable effort and contemplation for event venues. Consequently, there is often hesitance surrounding the adoption of a dynamic pricing strategy. The transition to a new pricing model can be challenging due to factors such as limited historical data and a lack of adequate reporting tools for proper data analysis. Unlike well-established sectors like airlines and hotels, event venues may struggle to collect the necessary data for accurate forecasting, a critical element of dynamic pricing. Moreover, the initial learning curve to effectively utilize dynamic pricing tools can deter teams from embracing this strategy.
Compounding this hesitance, event venues are challenged by deep-rooted customer perceptions and industry traditions. Customers often associate fixed pricing with fairness and transparency, making a shift towards variable prices appear risky. However, as businesses evolve and recognize untapped potential, these challenges can be overcome through customer education, strategic implementation, and the right technology partners.
Implementing a Dynamic Pricing Strategy
Event venue management software has come a long way in recent years, with Event Temple firmly leading the charge. New reporting tools are now available, enabling event venues to dive deep into historical data, project future trends, and make subtle yet impactful pricing adjustments. However, the road to implementing a dynamic pricing strategy is still not entirely straightforward. It requires careful consideration of factors that extend beyond the realm of simple reporting tools. Analyzing historical data to identify periods of peak and off-peak demand is the initial step, followed by a skillful fusion of competitive analysis and historical insights to establish a pricing structure. The ongoing process of implementation, monitoring, and calculated adjustments requires attention, patience and a long-term vision for success.
In Summary
While the capabilities of Event Temple's reporting tools undoubtedly pave the way for success, the art of dynamic pricing remains a multifaceted endeavour for event venues. By continuously fine-tuning your pricing strategy, you'll establish a reputation for flexibility and responsiveness, which will not only resonate with your customers, but will also be a catalyst for driving long-term, sustained revenue growth.
Rev Hospitality Co. was founded by Founder & Lead Consultant, Beth Evans. Beth is a graduate of Cornell University's School of Hospitality and has worked in the service industry for more than 15 years. Visit revhospitality.co for more information.
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