News

Last Update :6/5/2018

May OtR XS: Yield Management or Dynamic Pricing: Which is right for you?

Volume 17 • Number 5

Yield Management vs. Dynamic Pricing:
Finding Hidden Revenue Opportunities

The abnormally poor (dare I say abysmal) early season weather for much of the country presents a unique challenge to a number of golf facility operators: How the heck am I going to make up hundreds of early season rounds lost to weather in the balance of the year?  The optimistic answer to that is "With better customer marketing and likely by stealing golfers/rounds from your competitors."  Stuart Lindsay and I have been advocates over the year that great (not good) marketing can entice committed golfers to "make up" rounds lost to weather but we're also analysts at heart and the trends we've seen over the years reflect the reality that, as an industry, we rarely recover even a fraction of what Mother Nature deprives us of due to unfavorable playing conditions.

What's not gotten much press in the discussion of how to rebound from a slow season start is the potential to recover some of the lost revenue accompanying the rounds shortfall with better pricing strategy and execution to take advantage of both upside and downside gaps (I'll explain those in the full article).  Based on my observation over the past 3 seasons, there are three opportunity areas to generate incremental revenue which don't necessarily require absolute pricing power (i.e. the ability to take the entire rate card up season-over-season):

  • Improve consistency and competitiveness across the rate card - I've been doing comparative analysis of the rate cards the past two years here in the NW Chicago suburbs between peer courses (using Pellucid's consumer-based facility classifications, Public Premium/Value/Price) and I consistently find, for nearly every facility, 5-10 rates on their card that are clearly inconsistent with their peer group.  Closing these consistency gaps can generate more revenue either by moving to a higher price point in line with peers or lowering to a consensus rate which should drive more rounds for that daypart (which increases revenue)
  • Apply yield management principles and tools to further or more intelligently segment your rate card offerings - Most courses continue to price by what I call the standard dayparts (weekday vs. weekend, AM vs. PM etc.) regardless of their actual utilization or demand.  By looking at historical patterns of play against the "standard" rate card, it becomes clear that there is more variance in demand periods on weekdays than just 8AM-12PM and 12PM-closing for example.  Figuring out these demand-based divisions of your dayparts and adjusting the rate card to reflect them should yield higher revenue (either of the ways mentioned in the previous point above)
  • Consider a dynamic pricing tool and rules - Here I'll explain the difference (in my mind and experience) between yield management and dynamic pricing.  They often get used interchangeably in our industry but they're different animals in how the consumer perceives and reacts to them which makes dynamic pricing suited to some facilities and likely not others

The net of my thinking this month is that I believe that the only path to parity or above rounds and revenue performance for facilities in the geographies being run over by the truck of poor spring weather will be developing and executing a smarter, customer-based marketing plan for the balance of the season coupled with smarter pricing to uncover nickels and dimes in revenue gains to offset the rounds they can't recover.  You'll notice I didn't mention any successful strategy for discounting your way out of this situation; history has shown us that's a long road to a small house.  For our subscribers, read on to get the thinking and supporting facts and to learn how yield management differs from dynamic pricing and which approach is likely right for you.  For our Executive Summary recipients, you can get the rest of the story one of three ways (all can be previewed and purchased at Pellucid's website (www.pellucidcorp.com)):

  1. Subscribe to the Pellucid Publications Membership  for $495/yr.  Annual subscribers get access to all Pellucid publications (Outside the Ropes monthly digital newsletter, annual State of the Industry report portfolio (PowerPoint presentation, PDF commentary report, access to Orlando video of presentation), monthly Geographic Weather Impact Tracking (US, 45 regions, 61 markets), Top 25 US Golf Markets Ranking Scorecard (25+ dimensions and ranking for largest 25 markets) and the National Consumer Franchise Health Scorecard (expanded data and tables underlying the SoI's summary figures)
  2. Subscribe to OtR, 12 monthly issues for $130/yr with a money-back guarantee if you're not satisfied at any time during your subscription.  Subscribers also get access to the historical archive of past issues (50+) via the members-only section of the Pellucid website.
  3. Purchase single issues (including this one) for $14.95 per issue; click here to view available issues by title and select those of interest to purchase and download

©Copyright 2018 Pellucid Corp. All rights reserved. Quotations permitted with prior approval. Material may not be reproduced, in whole or part in any form whatsoever, without prior written consent of Pellucid Corp.


Pellucid Corp
www.pellucidcorp.com | jimk@pellucidcorp.com



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