MIAMI BEACH, Fla. — Pricing is a hot topic in today’s market — not because of TNCs, but because of the disruption caused by the technology that has allowed them to win over the hearts of the public. At the Summit, six operators from different markets who serve varied clientele helped answer burning questions.
What do you find are the best ways to drive demand to your service so you can maintain price integrity and make yourself wanted?
Mike Barreto, COO of Eagle Chauffeured Transportation Services in Upland, Penn., has been both a small operator and worked for one of the largest operations in the industry. He said operators must start looking at what’s being done outside of the chauffeured transportation industry.
“The hotel and airline industries have been able to create wealth in the services they provide,” he said. People are willing to pay extra for first or business class service, priority passage, and extra miles. These “bonuses” are what get passengers to shell out more money.
“We have to be able to create a better mousetrap that would enable us to have a pricing strategy in place to give them entry-level options if they want it,” he said. If clients do want extras, operators should be able to charge for those as well.
What are the most sophisticated pricing models in the service world that would best apply to limo operations?
Richard Fertig, president of Brilliant Transportation in Brooklyn, N.Y., built on Barreto’s airline example. “It’s very unlikely the person sitting next to, in front of, or behind you paid the exact same dollar amount for their seat. You know if you book too far in advance or too late, you might be paying a premium. There’s generally a sweet spot,” he said.
Limo companies certainly don’t do as many on-demand rides as a TNC, so the best way to go about figuring out pricing is to forecast. Do you know a specific date and time are going to be popular? “Maybe rush hour at seven until nine in the morning is a time when you’re sold out. It seems to me like you should charge more for that than noon on a Tuesday, when you have a lot of inventory,” he said.
He suggests looking at your historic busy periods versus slow periods. “I wouldn’t recommend you charge a premium, because nobody likes paying a premium. That should become your base rate, and then offer a discount. If you’re charging $100 an hour during prime periods and it’s a slow period, extend a discount.”
Another way you can work pricing is by availability. When your reservation agents look at a vehicle class and notice you have only three more minibuses or one more van, prices rise. If you have 10, consider lowering the price.
Scott Solombrino, CEO of Dav El / BostonCoach Chauffeured Transportation Network, said the problem with the corporate market is they dictate x rate for x transaction every day, and if you can’t do it, then they’ll find somebody else who can.
“So unless you have an industry-wide program, you would never get corporations to go along. We just don’t have that type of pricing structure where we have the power to tell corporate America we’re going to go with a specific pricing on a Tuesday in New York because it’s going to be more busy. On the retail side, you could do all of that and I think it’s a great concept to retail.”
What do you believe is the feasibility of industry companies and affiliates setting rates in real time like airlines, hotels.com, and any number of travel websites based on demand?
Nick Lopez, vice president of operations for JACO Limo in Lousville, Ky., made the point each market in the industry has different regulations, which can make pricing tricky. “We all have a lot of things specific to our market to determine what we can and can’t do, so there’s not a blanket way to do things,” he said.
Fertig posed a question to the audience: How many times do you go to a website looking to book a flight or hotel reservation, put in your dates and times, and don’t get a rate?
“How many of us can go to different markets or even our own market and go to a fellow operator’s website and try and look up a rate? It amazes me how many of us have all of these beautiful websites, but I can’t get a rate there. I’ll have to email you or submit a form. I might have to wait 24 hours, two days, who knows? You’re doing yourself a true disservice if you don’t offer your potential clients real-time rates through your websites or mobile applications.”
Robert Xavier, CEO of Legend Limousines in Smithtown, N.Y., agrees listing prices on your website can help. “I’ve put our rates on our site and I also think you also have to include some kind of educational material that shows why you’re worth more.”
What is the viability of pricing per mile, per zone, and/or per minutes/hours versus flat rates and hourly as directed? How could this be a benefit to operators and clients?
Nick Kokas, vice president of Brentwood’s Distinguish Executive Transportation in Michigan, believes with the onset of TNCs, having a time and a mileage formula within your database systems allows you to offer clients an infinite amount of pricing strategies.
“Therefore, it’s very hard for us to maintain databases of point A to point B times infinity. I don’t think any of us, even if you want to do hundreds of thousands of trips, have the manpower and data needed to calculate something like that,” he said.
Solombrino chimed in: “What’s so funny about the whole thing is [the TNC] business models haven’t improved — they’re failed business models already. And there’s nothing wrong with using time and distance, because time and distance determines what your fixed cost from a mileage perspective to run the vehicle is, including insurance and fixed cost of labor. At some point you can calculate the rate of what you should be charging them to profit. That method has been used for 50 years. There’s nothing wrong with that model.”
Kokas argues it’s important to know what kind of clients you cater to. “The time and mileage calculation is for people that have many vehicles roaming around and are going to offer service superior to TNCs and taxis, but really want some of that on-demand sort of point-to-point.”
He used an example to illustrate: Do hotels charge customers by how many minutes you spend in your room? Or do they charge per 24 hours? Motels use a different business model, where one can pay by the hour and meet a very different need.
“My point is, just because there’s a time to mile sort of calculation doesn’t mean that’s the right one for your business model,” he said.
— Lexi@LCTmag.com
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business management LCT Events LCT Leadership Summit Miami Beach Mike Barreto Nick Kokas Nick Lopez online pricing Richard Fertig Scott Solombrino service pricing surge pricing
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via Limo News http://www.lctmag.com/operations/article/724378/operators-of-all-fleet-sizes-tackle-best-pricing-practices
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