When we think of creative ways to market and grow our businesses – the airlines and major hotel companies do not usually come to mind! The marketing and inventory management methods used by these businesses usually make us cringe as we remember that person sitting next to us on the plane last month – who probably paid either much less or much more for her ticket! If only we had a clear understanding of how these pricing strategies worked we’d be able to apply these methods to our own businesses.
Hotels strive to maximize their revenue by selling “the right room at the right price to the right customer at the right time”. I know it sounds complicated but here’s how it works (in very simple terms)…
Hotels look at the current reservations on the books, then they compare this to their goals and determine dates which need more bookings (commonly referred to as “at risk dates” and “distressed inventory”). They then figure out how much they need to make to meet or exceed their financial goals. Once this is determined they sell rooms at the correct rate and method needed to make sure their goals are met.
Here’s how this simple “revenue management” strategy can be applied to ANY business…
Determine your “at risk” dates. Just like the hotels, take a look at your future bookings for the rest of the year. Look at last year too to help determine if dates are “at risk” or not. For example if you are currently open on July 4th weekend and usually have 2 events on this date – you can make an educated guess that some bookings/sales will probably come in (assuming you are still several months away). If your past booking history tells you that this is a slow weekend for you, this date would qualify as being “at risk”.
Calculate how much you need to make. Estimate how much you need each booking to be worth so you’ll meet or exceed your financial goal. We’re going to use the Weddding industry as our example. If you are a wedding planner and have 10 weekends open and at risk you’ll need to make $5,000 for each of the 10 weddings you hope to book in order to reach the $50,000 needed to meet your 2010 goal.
Get the word out and start merchandising! Merchandising is the methods and practices used to promote and sustain your business. Hotels use many different channels to do this. For at risk rooms they often use discounted channels such as Priceline and Hotwire. Wedding businesses could email their “vendor network” and let them know that discounted packages and upgrades are available for certain dates. Posting a “special” on your facebook fan page, website and blog will help inform your potential brides. The local Chamber of Commerce, Networking groups, Twitter and LinkedIn are all great place to start merchandising. Track down the attendee list from the last wedding show you attended and send a quick email to all couples getting married on any of these dates. Grab your sign-in sheet and follow-up with any of these dates. Call or visit the local hotels/banquet centers and tell them about the special packages you’re offering for your at risk dates. Consider “packaging” with a member of your vendor network. If you are a photographer you could create a package with a videographer from your network. Hotels and airlines love to create package for at risk dates because the price for each service is combined and never known by the consumer.
Although this strategy has been greatly simplified, I hope you find some ideas to apply to your business. As always I’d love your suggestions and comments. The possibilities are endless.