Sales is not just about making the sale…it’s about making the margin.
The airlines have this down to perfection, rarely do passengers pay the same rate for the same seat, the rates will fluctuate based on many factors, some that are obvious and some that are not so.
Which begs the question, why don’t more industries use dynamic pricing to ensure maximum profitability?
In many instances, the price of goods and services are calculated using any number of standard methods….the downside being that these prices are typically fixed.
Any movement in the fixed price is more often a reduction in order to secure business as opposed to an increase in price to maximise returns in circumstances where there is an additional revenue to be made due to particular prevalent trading conditions.
Therefore it transpires that the fixed price set by the company as the price of sales is often the highest price, or the aspirational price, rarely the realised price.
In any market, in any trading conditions, flexible pricing is a key part of profitability.
Flexible pricing relies on you having a very good idea about supply and demand.
Most typically, the crudest model is lower price means highest volume sold versus at the other end of the spectrum, higher price means lowest volume sold – not always true.
There can be few things more commoditised than an airline seat, yet using careful forecasting and supply and demand projections, with real time management information, the airlines are able to maximise revenues using dynamic pricing across on a standard offering.
The question asked by many of my clients is: how do I know I have the pricing right?
Before we work together their way of working has been essentially to look at what the competitors are charging and float their prices at about the same…does it work?
Yes it does.
Does it maximise profits?
Is there another way…YES
But why change? Why incur the risk? Why rock the boat?
For one simple reason…it’s counter productive not to.
A company that’s not growing today is not a company that is standing still, it’s drifting backwards.
Also: selling the same or similar product/service at the same price as your competitors is not a strategy, it’s a default position.
Increasing profit, managing cash flow are the indicators of a strong business.
Talk to us about how we can help you maximise your revenues and profits using a flexible pricing model to out sell your competition and attract high value customers.
Morton Kyle Limited
0779 002 1885