4 Pricing Strategies I Learned by Letting Strangers Sleep in My Bed
Let’s talk online pricing strategies… in bed. I’ve learned a lot about pricing by letting strangers sleep in my bed. Now, before you get the wrong idea, no, I haven’t joined the world’s oldest profession. I’m still an online marketer, and as an online marketer, I’ve loved learning about online pricing strategies by renting my guestroom to travellers via Airbnb.
I’ve been hosting and traveling on Airbnb for more than two years. I live in Tempe, Arizona, so most of my guests are students or academics visiting Arizona State University or athletes competing at Tempe Town Lake, and I find it a great supplement to my income. I run a small business, very small so I don’t have to deal with any HR issues, and therefore any extra income is a real boon. Spring Training baseball is also a big draw. My experience as an Airbnb host has taught me a thing or two about pricing strategy for online products. Let’s take a look at four of those lessons.
1. Meet seasonal demand
I offer a standard price that’s active most of the year, plus two variable prices that are tied to peak demand periods. In summer, I charge less. After all, Arizona doesn’t get a ton of visitors when it’s 110 degrees outside. During spring training (and other big events like Arizona’s recent Super Bowl), I charge significantly more. My seasonal pricing adjustments aren’t about gouging visitors. They’re about supply and demand. When demand goes up, so does price.
Question: What seasonal fluctuations in your business – even subtle ones – could you flatten by increasing and decreasing price to meet demand?
2. Offer volume discounts
As a host, my only real expense is the time it takes to run the laundry and freshen the room between guests. Longer guest stays mean less work and lower variable costs. So, when someone asks about booking for a month or even a week, I give them a discount to close the deal. Duh. Furthermore, the biggest money loser for my Airbnb business is letting the guestroom sit empty between stays. The more nights a guest stays, the fewer nights the room is fallow.
Question: Would your customers buy more of what you sell if you gave them a discount that didn’t cut too deeply into your bottom line?
3. Nix the gotcha fees
Some of my fellow Airbnb hosts charge a cleaning fee for each booking. As a traveller, it can be a little frustrating to discover this additional fee while comparing properties. Why not just work the cost of cleaning into the base cost of the room? These kinds of fees are called gotchas. (Ticket sellers, airlines, and cable companies are true masters of the gotcha.) Give me one good reason from a customer experience standpoint to tack on a gotcha fee.
Question: Could you work the cost of shipping into your base price? Would calling out “free shipping!” help draw in buyers?
4. Pad for extra services
Some Airbnb hosts offer extras, from airport rides to toiletries to breakfast. Others provide very little beyond a room and WiFi. Simply by offering convenience to a traveller, you can add two or three or more times the value of the item into your base fee.
That padding is important too because some folks will take advantage. A host I stayed with offered coffee, fruit, and muffins from her kitchen. One guest took the entire package of six muffins and the whole bunch of bananas! (It wasn’t me, I swear.) Customer service is important. Just make sure you’re charging enough to cover the added expenses.
Question: Are you padding your prices enough to account for little perks like rush processing, hand-written thank cards, and free gift wrap?
Master your prices without sharing your bed
You can learn a lot about a person by sharing your bed with them. Fortunately, you don’t have to let a stranger sleep in your bed to become a master of online pricing strategy. Ask yourself the questions posed in this article and you may find fresh opportunities to reduce your costs, increase your revenues, and improve your bottom line.