The psychology of pricing for travel & tourism brands

Last year I attended the Annual National Conference of Visitor Attractions and was fascinated by one speaker in particular, Debbie Richards from Baker Richards, who spoke about how to sell more tickets and memberships and make more money! Sounds good huh? I thought so…

Her presentation focused on pricing strategies and growth strategies – both of which I’m going to share with you now.

On its own, it’s hard to justify whether something is worth it or has the right associated value. Everything is relative.

Value and price are inherently linked, and whilst we’re quick to jump to discuss pricing options, Richards asked us, when do you start to broach the subject of changing the value proposition rather than the price?

Her first recommendation was - display a range of prices (with associated benefits) to allow people to compare and judge the perceived value of the price.

This is by no means a new suggestion, (one of my Silicon Beach write-ups touched upon it here) but you’d be amazed at how many businesses still don’t vary their pricing models, even if its just monthly versus annual options. Ideally, provide 3, and low and behold, the most popular will be the middle one, so choose that middle one wisely

Richards then posed a variety of considerations to help decide what options should be offered to customers – this was presented particularly in relationship to ticketing where a finite number of tickets may be available:

1. What prices are suitable (for your event)?
2. How many different pricing options would you consider?
3. What will the range and relationship of the prices be?
4. Relationship to pricing threshold?
5. Number of units (tickets) available at each price?
6. Discounting conditions?
7. Surcharges?

In terms of what may affect these pricing decisions think about:

1. Available inventory – date/day/time/location (e.g. seat) possibilities
2. Added value options - fast track/priority/food & beverage add-ons
3. Customer behaviour – frequency/party size/conditional purchase
4. Demographics – what will your audience be likely to afford

Pricing decision modelling

When you’ve considered these options it's advisable to put some decision modelling into practice to test a range of benefits and appreciate how (relatively) attractive they are…

Ultimately feature real benefits and pricing options that allow people to make their comparisons and determine the value proposition they want in return. But don’t go overboard, too many options can make the decision confusing, and could inhibit a sale!

The growth strategies presented fitted into five key areas

Essentially, there are only five ways to increase sales:

1. Acquisition – generate new customers
2. Reactivation – spark lapsed customers
3. Retention – keep loyal customers
4. Frequency – increase repetition from customers
5. Party size – increase the size of the order (upsell benefits for larger parties)

So, whilst considering your pricing strategies, think about how price may affect the five routes to driving sales growth.

The holy grail, is to match the right product, to the right customer, at the right time, for the right price.

And the best way to do this is to consider yield management pricing strategies.

The price/value trade-off is often made more explicit to the customer, and they can decide what they’re prepared to pay, and for what.

The whole presentation sparked a whirlwind of thoughts for a few clients of mine…

• Is the current ticket price good value?
  • What would I compare it to?
    • ...other similar experiences?
    • ...other indirect competitors aimed at the same customer?
  • They only have one price at the moment, what else could be applicable?
    • Do I add two prices higher, one higher/one lower, two lower?
  • How can I alter the package price to offer an alternative price point and sell more?
  • Should we advertise the RRP and a % discount so that the discount value can be perceived?
  • Can we offer F&B add-ons to up the revenue potential and customer value?
  • How can merchandise sales be included? What would they be, for how much and do we vary their pricing options?
  • Yield pricing is definitely an option to improve sales but what happens to the perceived value of the highest priced ticket?
    • Is this even an issue as customers are used to this nowadays?

…and the questions went on and on…

Perhaps you’ve faced similar questions yourself, or hopefully this article has sparked some more to stimulate debate… test & learn is the only real way of knowing what is going to be right for your business though.

Remember, whatever you do, you’ll have to set the agenda when it comes to pricing, as people can only really react to changes, and if you ask customers what they want you’ll likely get the response of lower prices plus more advantages!

In the meantime, I’ll leave you with a lovely diagram of how admissions, ancillary sales and affiliation pillars co-exist to provide an effective, integrated earned income strategy. Pick out the elements that might hold the answers for you…

Diagram courtesy of Debbie Richards, VAC Conference presentation, October 2017