6 Steps to Dynamic Pricing Success
By Roxanne Borger
The sun is beaming through your studio’s plate-glass windows, the floors are clean enough to enjoy brunch off of, a perfectly curated playlist is ready to flow through the speakers and the doors are open for business...yet only a few people walk through.
As a business owner whose enterprise relies on space and instructors, attendance is vital. With almost 50% of class spots offered by MINDBODY clients going unfilled each day,* there’s a huge opportunity to bring in more paying customers.
Meet dynamic pricing, your new secret weapon for fighting the dreaded class-half-full scenario. Dynamic pricing helps bring customers in by promoting your classes in the Last-Minute Offers section of the MINDBODY app.
Accounting for factors like past attendance, time of day and day of the week, dynamic pricing automatically adjusts class prices to meet real-time demand. When supply is low and demand is high, prices go up. When supply is high and demand is low, prices go down.
It only takes a few minutes to set up dynamic pricing. You choose the classes, the number of spots available and set the price range—and the best part, update your settings anytime.
Get set up for success with these six dynamic pricing pro tips:
Check in regularly to see how your dynamic pricing strategy is working. Aim to evaluate your performance at the end of each week, comparing to the previous week’s attendance and revenue. If you’re not seeing results after the first month, try adjusting your dynamic pricing settings. Be strategic about what you offer and keep tabs on what’s working—and what’s not. Modify and adjust until you find what works for you.
Tip: You can revisit the reports outlined in section one to track improvements in class attendance (Attendance Analysis and Attendance with Revenue), capacity (Classes tab) and revenue (Sales by Category). Make adjustments as necessary to your dynamic prices based on the results.
Choose the right classes
To find what works best for your business, start by offering a mix of your least popular and most popular classes. Aim to include about 30% of your total inventory.
By including your less popular classes, dynamic pricing works to incentivize customers by lowering prices when interest wanes. These classes will also be featured on the MINDBODY app, making them more visible to new customers.
Why include your most popular classes? The benefits are twofold. As class time approaches and interest increases, dynamic prices go up—earning more for each spot that’s booked last minute. This also incentivizes customers to book early when demand and prices are lower, giving you more foresight into attendance.
Tip: The more classes and spots you price dynamically, the better the algorithm works and the more you’re able to maximize your revenue. We recommend offering between 30% and 75% of your class schedule.
Offer the right number of spots
Look at your historical attendance to determine which classes typically have room for more attendees and how many. Then, dynamically price around 50% of those spots—you can always adjust your settings later.
For example, if your class can accommodate 20 people but only has 10 attendees each week, you’d dynamically price five spots. This leaves you with five regular drop-in spots and still reserves space for your regular members.
Choose an ideal price range
You can set your minimum and maximum as low and high as you like for each class, keeping in mind your existing brand and regular customers. If you’re not sure where to start, consider setting your minimum price 50% less than your regular drop-in and your maximum price 25% higher than your drop-in.
- For example:
- Drop-in: $20
- 10-pack: $150 ($15/class)
- Dynamic Pricing range per class spot: Minimum = $10; Maximum = $25
What are the benefits of reducing single class prices beyond already discounted class-pack prices? In many cases, dynamically priced quickly exceed your base rate. In the end, discounted class-packs and memberships will still be the best deal for regular attendees and members.
- For example:
Save space for your members
Set up dynamic pricing in a way that complements class attendance, while still honoring your existing customers. Design your dynamic pricing settings in a way that assigns the greatest value to memberships. Use your dynamically priced classes as a tool to fill open spots and attract new customers who have the potential to turn into members over time.
Tip: If you choose to dynamically price your entire schedule, you can exclude member-only classes by disabling dynamic pricing on a class-by-class basis. You can also exclude a service category associated with member classes.
Keep payroll in mind
Your payroll is an important aspect to keep in mind any time you adjust pricing strategy. Consider how it might be affected by increased class attendance. For example, if you pay your instructors per attendee, your payroll will also increase. Consider changing pay rates on the Dynamic Pricing Option range to alleviate added expenses resulting from improved attendance.
Track your progress
The goal of dynamic pricing is to bring new customers in and create lasting relationships, without compromising the experience of those who’ve been with you since day one. When done right, dynamic pricing benefits new and existing customers by boosting business, growing communities and creating new connections.
*MINDBODY aggregate booking data. 30 September 2017.