Challenges in Hospitality Pricing
The demand for hospitality service being highly inelastic, pricing right is of the essence. Even a tiny adjustment will lead to substantial profit increases, and moreover, pricing is one of the most efficient tools for controlling the occupancy rate; essentially, pricing is the ultimate tool for optimizing RevPAR.
While the hospitality industry has traditionally showed a relatively disciplined pricing behavior, focus has remained almost entirely on simple revenue-maximization calculations; which, as it turns out, don’t maximize either revenue or profits, as the effects of price on brand positioning and customer satisfaction are neglected.
- Price Positioning & Strategy
- New Product Pricing
- Market Launch Pricing
- Assortment Optimization
- Value Communication
- Price Increase Implementation
- International Pricing
- Promotional Optimization
Price Positioning & Strategy
Setting the overall price position against other products in the assortment, or against competitors, is always a key challenge in consumer services.
If you need to price a product (or service) in a new market, it makes all the difference in the world if you understand customers' willingness-to-pay.
Demand / WtP curves like the ones above, show the optimal price point where the curve peaks. In this example, the best price to optimize quantity is 10, whereas the optimal price for optimizing revenue is 15.
In the old days when research was expensive, this could be difficult to get through a corporate approval if launching in many markets at once. These days, with cost-effective research options from e.g. PriceBeam, the cost of getting these crucial insights should no longer be an issue.
Feature Value Matrix
Understand consumers’ willingness-to-pay for different product features and use such insights to optimize your product offering through add-ons and identification of salient features wanted by your target customers.
With PriceBeam´s Feature Value Matrix you can identify for which of your product features or benefits are customers willing to-pay, and how much. Understanding customer value of such attributes is essential in order to customize your product as necessary, wherever there is a potential fit. This is crucial to drive sales up, through attraction of target audience and additional features, as well cutting down on losses from features that aren’t valued.
New Product Pricing
Understand consumers' willingness-to-pay for new products, and use such insights to optimize prices when launching innovative products.
Market Launch Pricing
Setting the right prices when launching into new markets is often a challenge in FMCG/CPG companies. PriceBeam helps understanding market differences and setting optimal price points for each.
Pricing Managers, Marketing Managers, and Sales teams often find it more difficult to get pricing right when launching a product in a new market, as opposed to pricing the same product in an existing market. In theory existing-market pricing should go through the same steps as new-market pricing and look at value drivers and willingness-to-pay, but in many situations existing markets mean there is a reference point to base the price on. Such a reference point is lacking if pricing for a new market.
Understand the benefits and features that consumers value as well as those attributes that don't impact consumers' willingness-to-pay
While overall willingness-to-pay is a useful start, for really professional new market pricing, the next step should be to break down the willingness-to-pay into the individual value drivers. For what features or benefits are customers willing to-pay, and how much.
A good method for understanding the individual value-drivers is to use choice-based conjoint analysis. In this type of research (see e.g. PriceBeam's solution), respondents are shown a set of product choices. He/she then chooses his preference and is shown a new set of choices with other configurations; and again; and again. Through the choices it is possible to determine how much value the respondent puts on the individual features. The outcome: a series of value-drivers and the value potential customers put on them in the new market.
Price Increase Implementation
Prices should not be static. Quite the contrary, it is best practice to adjust prices upwards regularly, at least in line with competition and inflation, but often also higher thanks to brand innovations.
Quite often overlooked when pricing a market launch is what happens next year. Or the year after? Make a plan for how prices should evolve over time in the new market. Do you start high and then gradually lower the price as the product matures or becomes obsolete? or do you start low and then introduce price increases?
The answer should really lie in what the expected willingness-to-pay is over time. In most businesses and industries, it is likely to be a more solid strategy to start high and then over time reduce the price is necessary. This is often associated with human psychology, where it is easier to accept a price reduction than a price increase. Especially start-ups get this wrong, where they value themselves too low to begin with, and then struggle to increase prices later. But also big corporations get it wrong from time to time.
International Price Management
Prices vary across countries. Understand differences in willingness-to-pay per market and set prices accordingly.
Actually, in most industries there is a marked difference in prices between countries. This for a good reason: customers are willing to pay a higher price in some markets than others. So while it can in certain instances be tempting to introduce a single, global price to simplify IT systems or manage customers who exploit price differences, the upside and benefit from differentiated pricing around the world is significant. So don't fall in the trap of harmonizing prices.
PriceBeam market research can be run seamlessly in 127 countries around the world, with results ready and comparable in less than a week. Use our cost-efficient research to monitor WtP and optimize prices globally
Understand consumers' potential reaction to different promotional mechanisms or discount levels, and optimize the overall revenue.
Discounting and promotions are prevalent in most industries. Running a promotion or giving a discount can, when done properly, deliver incrmental sale or help gaining access to new customers. With PriceBeam's Willingness-to-pay research you can quickly research what your customers really are willing to pay for a product or service in a given market.
Solve different pricing challenges:
- What promotional mechanisms work well and what don't?
- Predict customer choice based on promotions offered.
How Does It Work?
PriceBeam’s solution conducts extensive market research, collects and analyzes data before delivering a detailed report on your customer’s willingness to pay. This data will enable you to stick out from the competition, maximize profit, and set prices that aid your long-run brand positioning.
Define offering & target market
You describe your product/service on our cloud-based platform. You also define the target market to research.
Create Market Research
We add all the research details, statistical setup, etc. so you don't have to worry about it.
Conduct Market Research
We collect responses about the given product/service in the defined target market.
Analysis & Results
The results are aggregated, analyzed and presented in our cloud-based solution.
Why You Should Choose PriceBeam?
PriceBeam delivers strong value on a number of fronts, which is why our clients choose us.
PriceBeam's studies ensure statistically significant results about willingness-to-pay.
Results as fasts as 48 hours in B2C and 1-2 weeks in B2C.
1% change in price delivers 11% improvement in value for the average company.
Easy to Use
You define the product and target market. PriceBeam takes care of the research and statistical details.
PriceBeam studies can be run in 127 countries. PriceBeam takes care of the localization.
Using cloud technology, PriceBeam studies cost a fraction of classic, old-fashioned market research.