On Monday we talked about yield management. And, more specifically, how this practices hinges on matching price to commitment.
As you can already guess, the best illustration of this in the ski industry is Liftopia. So being, let’s look at the model before (without) and after (with) their influence.
Before Commitment / Without Liftopia
The model prior to Liftopia’s push was quite different.
Though some strategies carried the same “reward behavior” tone like 2-for-1 (bring a friend), others might be better described as “discounts in exchange for distribution” as was the case for ski shops, Groupon, and places like Costco.
But in each case there was little to prevent cannibalization. Two friends that were already planning to ski could now do so at half price. So, like a box of coupons hanging on the drive-thru menu, it often handed out a valuable reward for nothing in return.
In the context of our discussion, these rewards could been have easily traded for a specific, valuable behavior on the part of the skier. They could have been traded for commitment. And without commitment, it was hard to do much in terms of yield management.
After Commitment / With Liftopia
The model that Liftopia introduced was built on commitment in exchange for savings. Skiers committed to:
With risk coming in the form of:
A resort could match the value of the discount to the size of the risk in order to drive the behavior they desired. In other words, they could manage the yield they achieved on their tickets.
Conversion’s Big Number
Like a good ecommerce platform should be, Liftopia has been serious about conversion from day one. Converting visitors into customers, browsers into buyers, searchers into skiers.
But of all the factors that turn searchers into skiers, there’s one that trumps them all according to Liftopia’s Evan Reece:
“The data we see at Liftopia has made it clear to us that the primary driver of conversion rate and overall revenue generation is having the right price available for the right product at the right time. In my opinion, yield pricing & management strategies are both the largest opportunity for revenue growth when done well, and the largest revenue risk when done poorly.
Quite simply put, the value of the experience a resort provides will always drive the prices resorts are able to charge, but how a resort prices those experiences relative to their value is the primary driver of overall revenue. Appropriate prices alongside high quality marketing and a website user experience that drives consumers’ confidence to transact yield overall revenue maximization.”
So, if price has such a massive impact on conversion and it’s a combination of the two that drive high yield, what more can we do with price? Once you see it the answer seems simple, but we’ll cover that tomorrow.
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