Dynamic pricing, also known as surge pricing or demand pricing model, is a pricing strategy in which the cost of a product or service is adjusted in real time based on various factors such as market conditions, demand, supply, customer behaviour, and competition.
Unlike fixed pricing or static pricing, which maintains a consistent price over a given period, dynamic pricing strategy allows for fluctuations in price to maximize profit margin and optimize sales.
This article will cover the following sections:
- Benefits of a Dynamic Pricing Model
- What activity types can I apply Dynamic Pricing to
- Dynamic Pricing, Promo Codes & Discounts
- Creating Your First Ruleset
- Applying Dynamic Pricing to an Activity
- Creating, Editing & Managing Bookings
- Viewing Dynamic Pricing In the Booking Itinerary
- Gift Cards
- Important Things to Note
Benefits of a Dynamic Pricing Model
Increased Revenue
By adjusting prices in real time based on market demand, dynamic pricing can help your business optimize its pricing strategy for better revenue management. For example, during periods of high demand, your business can increase prices to capture more revenue.
Improved Competitiveness
Dynamic pricing can help your business stay competitive by allowing it to adjust prices in response to changes in market demand and competitive pricing. This can help your business attract more customers and increase market share. Additionally, it allows for more price promotions such as segmented pricing, peak pricing, competitor pricing, group discounts, time based pricing, etc.
Better Inventory Management
Dynamic pricing can help your business better manage its inventory by reducing overstocking and stock-outs. By adjusting prices based on demand, your business can encourage customers to purchase products that may be overstocked or discount products that are selling slowly.
Increased Customer Satisfaction
Dynamic pricing can help your business offer a different price to customers during periods of low demand, high demand and based on customer behaviour which can increase customer satisfaction and loyalty. Customers may be more likely to return to your business if they feel they are getting fair prices.
Increased Efficiency
Dynamic pricing is a price optimization strategy that can help your business automate its pricing process, which can increase efficiency and reduce labour costs. By using data analytics and dynamic pricing algorithms to optimize prices, your business can save time and resources that would have been spent on manual pricing adjustments.
Overall, dynamic pricing can help your business improve its bottom line by increasing revenue, improving competitiveness, better inventory management, increasing customer satisfaction, and increasing efficiency.
| It's important to take into account the potential impact of Dynamic Pricing and price discrimination while making a pricing decision as it will affect other avenues of reservations. For instance, how this might affect scenarios where fixed prices are already indicated on materials like brochures, or contracts involving pricing agreements with external resellers |
What activity types can I apply Dynamic Pricing to
Dynamic Pricing can be used with the following activities:
- Transportation
- Activity / Custom
- Rental (Both passenger and equipment-based)
- Ticket
- Interval
| Note that dynamic pricing does not currently apply to packages, pricing options or products. |
Dynamic Pricing, Promo Codes & Discounts
Dynamic Pricing is not considered a discount or promo code. Discounts and promotional codes can be applied on top of the final price, the base price of the activity plus the additional parameters applied by the dynamic price ruleset.
An operator can choose to apply a discount through the ruleset to offer personalized pricing. For example, you can create a pricing rule based on group size i.e. the more people in your group, the lower the cost per person will be.
Creating Your First Ruleset
Creating a pricing rule is the first step in implementing Dynamic Pricing. Within your ruleset, you'll be able to set criteria such as:
- Parameters - When certain conditions are met, they will trigger multipliers to adjust the standard activity rate.
- Pricing limits - Limit the minimum and maximum price to avoid unreasonable pricing.
Available Parameters
|
Parameter |
Activity Types |
Notes |
|---|---|---|
|
Activity |
Applicable to all |
Multiplier applies when any of the selected activities are booked |
|
Activity - Date Range |
Applicable to all |
Multiplier will apply to activities that take place within the given date range |
|
Activity - Day of Week |
Applicable to all |
Multiplier will apply to activities that take place on the selected day(s) of the week |
|
Activity - Departure Time |
|
Multiplier will apply to activities that depart (or start) within the specified time range. |
|
Activity - Load Level % |
|
A multiplier will apply once reservations reach the designated percentage. For instance, if the load level is configured at 80%, the multiplier will be activated once the activity is filled to 80% capacity. Based on confirmed bookings only, does not include any pending bookings |
|
Activity - Month |
Applicable to all |
Multiplier will apply to activities that take place on the selected month(s) |
|
Booking - Date Range |
Applicable to all |
Multiplier will apply to activities that are booked within the given date range |
|
Booking - Day of Week |
Applicable to all |
Multiplier will apply to bookings made on the selected day(s) of the week |
|
Booking - Group Size |
|
Multiplier will take effect when a group size meets or falls into the range of the group size specified. When booking a group that crosses over more than one range, all passengers in the group are charged a higher rate |
|
Booking - Lead Time |
Applicable to all |
Multiplier will apply to bookings made a certain number of days before the activity date. (i.e. a discount for bookings made 90 -120 days in advance.) |
|
Booking - Month |
Applicable to all |
Multiplier will apply to bookings made on the selected month(s) |
|
Customer Type |
|
Multiplier will apply to bookings with selected passenger types |
|
Equipment Category |
|
Multiplier will apply when activities using specified rental equipment are booked. Applies to Equipment Pricing |
|
Holiday Date |
Applicable to all |
This multiplier will apply when an activity date falls on the selected holiday(s). The holidays are based on the country set in Company Info in your Zaui system. |
|
Rental Duration - Hours |
|
Multiplier will apply for bookings that have a rental time that meets the specified range. |
|
Seat Type |
|
Multiplier will be applied to specified seat types |
|
A booking can meet ANY of the parameters set and does not need to meet ALL in order for the multipliers to take effect. Parameters that do not apply to the booking will be ignored. |
For example:
If a booking is made for the activity Ticket on Tuesday with a start time of 9:00 a.m then,
- The first parameter will apply (Base Price x2)
- The second parameter will apply (Base Price x3)
- The third parameter will be ignored
Pricing Limits
Pricing limits are set to ensure that multipliers do not increase the price outside of a reasonable range.
Setting a minimum will ensure the price does not drop below your set value and a maximum will ensure the cost does not go above the set value.
Saving Your Ruleset
Make sure to save your ruleset once you have set up everything as desired. If you have any missing details, you will be unable to save them. As shown below, If you find the Save button is greyed out, it's most likely due to missing information. You can spot any missing information with a yellow .
Applying Dynamic Pricing to an Activity
Once you have a Dynamic Pricing ruleset created from the steps above, you can apply it to an activity using the steps outlined below.
Here's how it works: When a guest books, the system checks both the regular price code/price table date range and the Dynamic Pricing Ruleset date range. If the rules in the Dynamic Pricing Ruleset match the booking time and conditions, then those new prices are used. This a great way to offer special deals or prices when certain conditions are met. This gives you more flexibility to offer different prices at different times.
If you do not already have a ruleset created, you can click on Create Ruleset. See Creating Your First Ruleset. If you have already created one, click + Add Ruleset as shown below.
Once you've added your ruleset, you may want to adjust the fields in this section to match your requirements.
- Ruleset: Select your created ruleset.
- Start Date/End Date: This will default to the start and end date of the activity. The date can be changed as needed.
- Booking Source: By default, dynamic pricing will apply to all booking sources. To exclude them from the list, simply remove them from this field.
- OBE will apply to all online bookings
- Distribution will apply to all resellers in your Channel Partners
- Mobile will apply to any bookings made via the Zaui App
- Core will apply to all bookings made via the Back Office
Depending on the selections in the Booking Source fields, the three sections below will show or hide to allow even more control over how dynamic pricing is applied.
- Portal: Select any portals you want dynamic pricing to apply to
- Company Group: Select any company groups for the new pricing to apply to as found in Resellers > Companies > Company Groups
- Channel Partners: Select any resellers for the new pricing to apply to as found in Resellers > Channel Partners
Once you've finished setting up your ruleset, be sure to Save your activity.
Creating, Editing & Managing Bookings
Below is the behaviour that will apply when a booking is edited. reprocessing a booking is also considered an edit and will affect the booking date.
Editing the booking after it’s been confirmed:
- Adding passengers → All passengers repriced at the current rate
- Removing passengers → All passengers repriced at the current rate
- Changing booking details such as name, email, and phone number → Keep the current price
- Same activity, different day → All passengers repriced at the current rate
- The same day, different activity → All passengers repriced at the current rate
- Different day, different activity → All passengers repriced at the current rate
- The same day, same activity, different time → All passengers repriced at the current rate
- Different day, same activity, same time → All passengers repriced at the current rate
| The Dynamic Pricing ruleset that is applied is based on the original booking source. |
Viewing Dynamic Pricing In the Booking Itinerary
The historical notes of a booking itinerary will break down which Dynamic Pricing parameters and pricing limits are applied. The breakdown, as in the image below, will show the multiplier as well as the dollar value added to reach to total booking price.
Gift Cards
Guests who buy activity gift cards are purchasing the activity itself. This means if a gift card is purchased, it can be used for that activity regardless of the current price. If a gift card was purchased at a lower rate, there would not be an outstanding balance for the difference. The same applies to the reverse where a guest may buy a gift card at a higher price. The booking will not show a credit/refund owing.
Important Things to Note
Pricing is a powerful tool that can be leveraged to increase your revenue, there are certain things to consider that may have an effect on your operations. The following is a list of considerations that you should keep in mind:
- You can apply more than one dynamic pricing ruleset to an activity but you can't have overlapping validity dates. Only one ruleset can be valid at a time.
- Reservations that are edited will consider new parameters and will apply to ALL passengers
- For example: If one of your parameters is Booking - Day Of Week Equals Tuesday and the original booking was made on Tuesday, the multiplier will apply. If the booking is then revised on Wednesday, the multiplier will no longer apply.
- Another example would be if you have a parameter for Booking - Group Size Equals 10 and a group of ten books, triggering the multiplier, and the booking is edited to 9 guests, the multiplier will not apply and may result in an outstanding balance for the booking.
- A booking can meet ANY of the parameters set and does not need to meet ALL in order for multipliers to take effect. This can result in multipliers stacking and inflating a price beyond what was intended. It's encouraged to use the Pricing Limits section for this reason
- Due to limitations with most OTA systems, Dynamic Pricing is not currently able to reflect on an OTA's site.
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