How Dynamic Pricing Helps Your Business
Dynamic pricing is a strategy that allows for flexible prices based on different factors. If you’ve ever tried to purchase airline tickets for a holiday weekend trip, you’ve been very aware of dynamic pricing. As more people want to fly at that time, airlines are able to charge higher prices for tickets. A quick search into mid-week flights will show lower prices, reflecting the lower demand for travel during the work week. It’s hard to remember a time when flights weren’t priced in such a way; American Airlines was the first company to implement this strategy in the 1980s.
As technology has advanced, this strategy has expanded to other industries. Uber and Lyft use dynamic pricing as well—referring to it as ‘surge pricing’ during high-demand periods. Even Disney has started using dynamic pricing in an effort to even out attendance at Disneyland and their other parks, charging a 4% discount on low-demand days and as much as a 20% premium on the busiest days.
How can dynamic pricing help your fitness studio?
One of the biggest challenges that fitness businesses face today is handling variable supply and demand. Attendance can fluctuate for a variety of reasons, ranging from the day of the week and time of a class, to seasonal behavior and even the weather. Class demand is rarely constant, and if you do not have a robust strategy in place to manage through these changes, your business runs the risk of half-empty classes and lost revenue.
Dynamic pricing can be a powerful solution to mitigate this risk. Fitness studios and gyms can use this flexible strategy to help them get more customers in the door, increase occupancy rates, and maximize revenue in the process.
Manual pricing based on supply and demand often proves impractical due to the numerous factors at play like weather, time, and customer preferences. With Mindbody’s dynamic pricing, a variable pricing algorithm does this work for your fitness business and eliminates the guesswork.
Dynamic pricing through Mindbody empowers studios and gyms to discover optimal pricing to help fill empty classes and increase returns during popular periods of time.
Benefits of dynamic pricing
There are a number of key benefits that dynamic pricing offers for fitness businesses.
You can maximize your revenue
Maximizing occupancy and filling empty spots is essential to increasing profitability per class. Any unfilled class reservation ultimately means lost revenue, and dynamic pricing can help fill the spots in your less popular classes by offering the right price at the right time. If you offer discounted rates for some of your less popular classes, for example, you'll motivate customers to fill in classes that may otherwise go underutilized. Since these classes will occur regardless of whether there are empty slots or not, are can create a win-win scenario where you simultaneously offer customers a great deal while also boosting your bottom line.
Imagine a class with a maximum capacity of 15 people, but typically only attracts 5 attendees. If your typical drop-in rate is $30/class, the 10 empty slots effectively translate into an additional $300 in potential revenue. By offering a discounted rate of $20 for these remaining spots, you'll be able to some of that revenue. Intelligent dynamic pricing algorithms can even help ensure that the price will automatically increase as more people sign up.
You pay employees more during busy periods
By employing dynamic pricing and increasing revenue, you increase your ability to reward high-performing employees who support the business during busy periods. This flexibility is crucial for recognizing and incentivizing the efforts of your staff.
You can smooth out seasonal and daily demand
Effectively managing seasonal fluctuations and daily demand is another key benefit of dynamic pricing. Unlike static pricing, dynamic pricing considers historical data and real-time trends to ensure consistent revenue throughout the year. The algorithm can help you encourage early bookings during low-demand periods, entice customers to try new classes at discounted rates, and maintain optimal attendance levels.
You can attract new customers
Dynamic pricing can help you get more customers in the door and reach a larger audience. 2.4 million users actively use the Mindbody marketplace worldwide, many of whom are looking to take advantage of “Last-minute Offers.” By engaging potential clients who are searching for new fitness experiences and the best deals, you can capitalize on this growing community and reach new customers who have not previously heard of your business.
