Smarter pricing structures will allow travel brands to
create more relevant prices for their customers, boosting revenue and loyalty
finds a new report.
Pricing within the travel industry is evolving to match consumers
and what they are willing to pay far more accurately as a result of a better
understanding of impacting variables and more ability to deploy granular prices
across distribution networks. The upshot of this, according to a new report, is
that travel brands can continuously adjust their pricing to suit their
customers and thus maximize the revenue they get for each route or room. To
explore the step change in capabilities and how they can be implemented, you
can download
the Dynamic and Personalized Pricing report completely for free here now.
Currently,
most revenue management systems (and revenue managers) take into account things
such as historical demand curves, events and conferences, seasonal factors and
overall route capacity, etc. However, with the changing ability of systems to
factor in a greater depth of information in very short timeframes and from an
almost unlimited number of sources, the calculation of demand is starting to
change.
Firstly,
brands can bring in more information surrounding the destination and target
market. For example, for a short leisure trip, a system could factor in the
weather at different locations and use that as a component of the algorithm to
calculate anticipated demand. Then there are customer personas that are growing
increasingly detailed and only really limited by the amount of available data.
This is
allowing micro-segmentation and fundamentally changing the way offers are
created to the point where each individual could receive a different offer when
considering all the possible combinations.
With
micro-segmentation, the industry is moving away from the simplistic leisure
versus business traveller divide and the other common segmentations that have
been used to date. The idea is to apply a finer grained mesh – perhaps with
dozens or even hundreds of micro-segments as opposed to five or ten. With this
systematic approach, applying factors such as willingness to pay and
demand-based factors to individual offers provides considerable price-point
differentiation.
The
fundamental processes can also be applied to ancillaries, in what is termed
complete offer creation that creates the next level of differentiation. Complete
offer creation involves bundling additional products that are probabilistically
calculated to be desired by the consumer. In the case of the airlines, this
could mean an offer in which the travel, wireless connectivity, a checked bag
and a warm meal is included in the overall offer price. If the brand can add
value to the customer’s request by addressing an additional need or desire, and
the offer is within the consumer’s willingness to pay, an expanded offer can
not only generate additional immediate revenue but also a higher level of
customer satisfaction and potentially additional follow-on revenues.
This
creates a huge range of possible combinations that means, effectively, pricing
is coming down to the individual. The value created from this investment into
more complex and granular pricing is leaps in revenue through maximizing the
pricing level in each demand period and minimizing the amount of inventory left
unused.
- Detailed analysis from a report written by
a pricing expert and consultant.
- A breakdown of modern pricing practice in
travel to help you get to grips with the current environment and how it is
changing.
- Key rules to create your own advanced
pricing regime.
- Real-world examples of advanced pricing
practices from Airbnb, Amazon and more.
- How to integrate dynamic pricing into increasingly
complex distribution networks.
