Dynamic pricing has an extensive application across diverse industries. This includes everything from accommodation, flights, tourism products, Uber (surge pricing) and finally arguably the leader in Amazon, repricing millions of items every few minutes based on demand.
Ferries typically adopt some form of dynamic pricing, but generally limit its application to increasing prices at the nominal beginning of their ‘high’ season.
What is Automated Dynamic Pricing?
Sometimes it can be difficult to define what dynamic pricing is, it can mean:
(1) Different prices for different days (e.g. cheap Tuesday), in a particular direction; or
(2) Seasonal pricing e.g. at the beginning of high season pricing increases by 15%; or
(3) A combination of the above; different base prices for seasonality and day of the week and automatic increase and decrease in price based on factors like occupancy and time before departure (Automatic Dynamic Pricing).
Automated Dynamic Pricing does not involve manual, human-driven pricing adjustments, it leverages algorithms to automatically adjust prices based on the parameters set by the operator and takes away the need for human oversight and decision-making.
Is Automated Dynamic Pricing good for the customer?
Since the introduction of the hybrid and full-time work from home arrangements most operators have experienced a smoother demand curve between their high highs and low lows.
A recent study in the UK found that 51% of passengers would travel at different times if peak / off-peak pricing incentivised them to do so. What does this mean? You fill those trips that have low occupancy with those that are flexible on timing and sensitive to price. You fill the most popular trips with people that are not flexible and aren’t sensitive to price. It also means that the more popular trips that usually book out very far in advance may have availability closer to departure, making it open to the last-minute booker, who is generally willing to pay more. Also, if you reduce price, it also means that you’re making it possible to travel cheaper than ever before.
Dynamic pricing also incentivizes booking early. This is generally accepted as ‘fair’ for customers; those who get in early get the best price.
However, the other side to this argument is that it may marginalise those who cannot afford to travel at peak times, thereby relegating them to the worst commuter times. Things like removing dynamic pricing from certain departures (promised pricing) and resident discounted rates can alleviate this.
Is Automated Dynamic Pricing good for the business?
This is a very well accepted yes. It does this through optimising the yield of every departure. As ferry operators we have a fixed capacity with relatively fixed underlying cost. The higher the capacity, the higher the return on investment. Dynamic pricing enables ferry operators to practice yield management, which involves adjusting prices to maximize revenue per sailing by selling the right number of seats at the right price.
One of the perhaps less obvious benefits of automated dynamic pricing is creating a potentially greener service. The higher your utilisation, the lower the number of departures required to service the same amount of people.
Automated Dynamic Pricing is a powerful tool that may enable you to reduce your emissions, increase your yield and provide exceptional service to your customers.
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