Discover how Scientific Pricing can help your make 35% more revenue for your hotel business in 2016.
Employing a scientific pricing methodology is the only reliable way to consistently determine optimum prices that will maximize your hotel’s revenue. This robust methodology is based on the principles of logic, economics and scalability.
Yaroslav Rozhankivskyy: Три складові і три передумови максимальної продуктивн...
The power of scientific pricing
1. The power of Scientific Pricing.
How to make 35% more revenue?
Maximize your Revenue
Hospitality and Travel technology solutions
2. WHAT IS BEHAVIOURAL PRICING FOR HOTELS?
Behavioural Pricing is a form of price discrimination. The goal of price discrimination is to
maximize profits by adjusting the price that different customers pay based on data about
the consumer. Price discrimination is common offline, such as the Museum of Modern Art
charging adults $25 but students only $14.
PRICE DISCRIMINATION
3. CONSUMERS PSYCHOLOGY
Adding Small Differences can Increase Similarity and Choice
$100 $100
Scenario 1
$100 $110
Scenario 2
46% People
made a purchase
77% People
made a purchase
What does this mean for my hotel?
$100 $100
What should
be the price of
my hotel room?
HOTEL 1 HOTEL 2
MY HOTEL
4. The Anchoring Effect
$300 $200
$100 $120
Should I be the
Anchor or
price lower?
12% increase in sale of $200 watch
as $300 watch acted as an Anchor
What does this mean for my hotel?
HOTEL 1 HOTEL 2
MY HOTEL
CONSUMERS PSYCHOLOGY
5. Weber’s Law of Just Noticeable Difference
$10
Per Gallon
$9.8
Per Gallon
$10.4
Per Gallon
$14
Per Gallon
30%
Should I increase
my price by
10% or 30% ?
20%
Price
Increase
Price
Increase
Customers don’t notice an increase when
the average point is less than 10%
What does this mean for my hotel?
HOTEL 1 HOTEL 2
MY HOTEL
CONSUMERS PSYCHOLOGY
6. Social is the King
$150
What is the right
price for my hotel room?
$150
Average Ratings 4 of 5 Average Ratings 3 of 5
Price $17.99 Price $14.99
1% point increase can increase rate by 15% What does this mean for my hotel?
HOTEL 1 HOTEL 2
MY HOTEL
CONSUMERS PSYCHOLOGY
7. WHAT IS SCIENTIFIC PRICING?
Optimized Pricing
Business Analytics
Automation
9. OPTIMIZED PRICING
Price optimization is the use of mathematical analysis by a company to
determine how customers will respond to different prices for its products and
services through different channels.
Amazon, one of the largest retailers that uses optimized
pricing, changes its prices of its 15-20% of its inventory
every 10 minutes on average.
The company saw a 27.2% increase in sales from 2012
to 2013 and generated over $44bn in sales
just last year.
This resulted in Amazon being named one of the top 10
retailers in the US for the first time.
11. BUSINESS ANALYTICS
Hotel Occupancy
What is your current booking pace?
60%
70%
50% 85%
40%
OCCUPANCY RATE
o Functions of the increased price model:
a) increase supply
b) temporarily intentionally reduce demand.
o By offering more money to drivers, they were able to increase on-
the-road supply of drivers by 70-80%, and more importantly
eliminate two-thirds of the unfulfilled requests.
13. BUSINESS ANALYTICS
Perceived Value
Average Ratings 4 of 5 Average Ratings 2.3 of 5
Price $17.99 Price $14.99
Restaurant 1 Restaurant 2
How does your hotel fare against the competition in value when prospective guests are
making their hotel shortlists?
17. WHY SHOULD HOTELIERS WORK WITH SCIENTIFIC PRICING?
Would be process driven:
Which means that a revenue manager would consistently follow
the same process in determining the optimum price.
Would be scalable:
A revenue manager should be easily able to continually replicate
the process and scale it up, irrespective of the number/ type of
rooms in the property.
Would be fast:
The methodology can be applied at a speed which would match
the pace of market movements. Market factors change rapidly,
and if revenue managers aren’t fast enough, they will not be
able to determine the right price in time to distribute those
prices.
In one experiment by Yale University, researchers gave users a choice of buying a pack of gum or keeping the money. When given a choice between two packs of gum, only 46% made a purchase when both were priced at 63 cents. Conversely, when the packs of gum were differently priced—at 62 cents and 64 cents—more than 77% of consumers chose to buy a pack.
Placing premium products and services near standard options may help create a clearer sense of value for potential customers, who will view the less expensive options as bargain in comparison.
A change in something is affected by how big that something was beforehand. When it comes to price hikes, there is no magic number, but Weber's law shows that approximately 10 percent is the average point where customers are stirred to respond.
According to the economist Richard Thaler, perception goes a long way toward justifying whether or not a price is reasonable. So it’s beneficial to create a compelling narrative around a product.
Example– price of beer from a pub vs same beer from St. Regis’s posh bar
Example– Gambling: LV vs Macau
Example– dominos vs papa john’s
Can you please redesign the info graphic.Replace the word Activity streaming with End to End revenue management suite.Change the logo color of RezGain and make it similar to PriceGain combination