12 minute read

The Driving Factor Behind the Business Travel Comeback

Stop Making This BIG Pricing Mistake

What Tactics Do You Use In Your Pricing Strategy?

There are various ways, such as running promos like "buy one, get one free," or branding it into your customers' minds like "everyday low prices." Some coupons discount 20% off any item in the store or offer subscription discounts versus buying one-time that you submit at the online checkout. However, I learned that organizations make a common mistake in pricing, and you can use science to correct it.

We discussed the tactics and pitfalls of pricing strategy. At first glance, the general pricing strategy seems basic: get the highest price possible that sells enough product to make an excellent profit. However, it turns out that there is more to pricing than that, and no surprise here, some of that extra bit is psychological.

There are two ways to analyze pricing: quantitatively and psychologically. Pricing can produce excellent data, which you can analyze quantitatively and do a lot of fantastic things. There are also psychological impacts of pricing, discovered and published in the behavioral pricing research literature. Neither quantitative nor behavioral pricing analysis is correct while the other is wrong; many times, the two ways to look at the data don't even conflict.

Price Elasticity of Demand is an example of a concept introduced by the behavioral pricing research literature. Price Elasticity means that people are sometimes more sensitive to price changes than other times in layman's terms. You can take pricing data and purchase data and compute elasticities around it. Then, you can use those computed elasticities to guide you in making future price changes.

In other words, these two ways of looking at pricing are collaborative, not combative.

Pricing is an area where quantitative people look at behavioral pricing findings and incorporate them into their models. Many of the behavioral pricing folks will also look at the results of the quantitative models and try to develop theories around them. out how much by changing the price and seeing what that does to your demand. From a fundamental perspective, you can see you sold X number of products at this price. Then, you reduce the price by ten percent and see you sold Y amount. If the difference between X and Y is only a small percentage, then it means the demand was inelastic around price.

In other words, changing the price did little on the sales side. However, if the difference was significant between X and Y, then changing the price did change things a lot on the sales side.

Elasticities are a powerful tool, but they're also limited by the data that you have. Moreover, you must be careful that the pricing is the only change in the demand situation. Usually, it's more complicated than that. For example, in a grocery store, you might have reduced the price of your product, and it affected sales. However, did you advertise the price? Through what channels? Was there an end-cap display? Was there signage that pointed the customers to the "deal?" Moreover, these are only the things you can control. What your competitor is doing in the marketplace can also affect what your customers buy from you.

So, the beautiful part about pricing is that we do get these numbers out of it, which produce clean quantitative models. The downside is that even the most sophisticated models that we have do not capture all the influences on those numbers. The most effective pricing models will incorporate as much of that influential data as they possibly can. However, I would caution you to avoid putting blind trust in your models' output since some unknowns are in the mix.

The Two Levels of Pricing

For my part, everything seems to be on a constant sale. So, discounting pricing appears to be a favorite strategy. However, is there more to pricing strategy to drive customer behavior? products strategy and general price impressions. With pricing strategy around individual products, you try things with the price to make the sales numbers increase using a set of strategies and tactics involving the established price, and the rate and frequency of the discount, among others.

The second level is general price impressions. General price impressions are what people form about your brand. Some brands have a high price impression, and others don't. It's like the difference between the price impression of a Rolls-Royce versus a Kia.

Retailers can have that general price impression, too. Walmart has a different price impression than Neiman Marcus. Therefore, in these cases where the general price impressions influence customer behavior, there are other strategic concerns for pricing. Their prices are part of the brand for the store.

Many decisions customers make on those two different levels will be consistent. If you make a lot of the individual prices in your store low or seem low, then the store will likely seem to have lower prices, i.e., Walmart and its everyday low prices. However, suppose you charge $800 for a designer necktie at Neiman Marcus. In that case, most people will have a high general price impression of your store, even if you price other things amongst your offerings more reasonably.

However, we sometimes discover that our general price impression was wrong once we take a deeper dive into the individual pricing strategy. I was doing some shopping on the Publix app the other day. Publix is a grocery store in the Southeast US. It has a high general price impression, combined with a reputation for high-quality goods and a high level of customer service. However, I didn't want to overpay for groceries, so I also downloaded the Walmart app. After comparing prices between the two brands, I was surprised to learn there wasn't a significant price difference between the two, even though my general price impression of each brand is quite different.

Wal-Mart, but not by a lot. It was a pleasant surprise. It turns out that we humans have a hard time with magnitudes in our general price impressions. We get it at a product level but not at a comprehensive level for the entire experience.

So, What Can You Do with This Information in Your Pricing Strategy?

There are some strategies you can use to use science in your pricing strategy. Start by understanding the following:

For most stuff, people don't have great reference prices, so give them one. People don't always know what an appropriate comparison for your price is. There are exceptions. Therefore, if we know people don't always have great reference prices, we can make a price more attractive by giving people reference prices making our price look more attractive. For example, Amazon might have the price struck through and a new price listed next to the items you are considering. That's because you might not have a reference price for a lamp/hockey stick/hairbrush when you initiated the search, but now you do because Amazon gave you one. Amazon gave you a way to evaluate the price. This strategy is anchoring, which provides people with a starting point from which to negotiate. One of the results most replicated in research on pricing is that if you give people a reference price, they're going to use it-and hopefully evaluate your price more favorably. People will skip complicated mental math when comparison shopping. "Buy one, get one free" works to obscure comparisons. If you are comparing two brands of Ginger Ale at the grocery store, you can compare those prices easily. However, if one of the Ginger Ale brands throws in another bottle for no additional money, the math gets harder (not really; the price per bottle reduces by half, but I digress). Because the math with buy-one-get-one-free offers involves another step, many people won't bother, eliminating direct comparison. (Moreover, the buyone-get-one-free promo promotes stockpiling, which is a win for manufacturers and retailers. If they can get you to pull forward that demand and buy all those Ginger Ales simultaneously, they will. After all, why should they put off a sale until tomorrow when they can get you to buy it today?)

Now, putting these two pricing truths to use has some practical advice:

1. Determine your pricing goal. I would encourage you to recognize that there are multiple pricing goals that people can have. So, is your pricing goal to move this one item or service? Then, there's a set of pricing strategies that work for that. Is your goal to create a price impression for the brand overall or the retailer? That requires a different approach that collaborates with your individual pricing strategy; otherwise, you can send mixed signals. So, know what your goals are and what's important to manage. 2. Know what reference price your customers have. Often, we assume it is our competitor's price. Sometimes it is, but sometimes they're comparing our price to a different category, like a previous experience. If the last time you bought a refrigerator was ten years ago and you remember what you paid for at that time, you're going to be shocked when you go back to purchase refrigerators now.

3. Consider how you can influence those reference points. Can you give them other reference points to use, comparison ads or markdowns, etc.? Controlling those reference points can help your price look better by comparison.

4. Don't oversimplify pricing influences. Remember, like everything in the Behavioral Sciences, pricing is complicated. Pricing strategy requires some attention, deliberate design, and testing to get right. From a learning perspective, try to understand the variables influencing pricing to illuminate your quantitative findings, like seasonality, competitive disruptions, or economic conditions. The combination of both hard data and psychology will help you establish a winning pricing strategy.

It's no surprise that some organizations devote substantial resources to managing pricing strategies. It's an essential and evolved area. However, by understanding the influences, managing the parts of the decision-making process that you can, and being deliberate and flexible, you can ensure that you stop making pricing mistakes and use science to help you ensure that the Price is Right.

The Driving Factor Behind the Business Travel Comeback

By Speleos Dravillas

As vaccine distributions continue worldwide, the demand for traveling is returning as evidenced by airlines and hotel bookings. Tripadvisor says 67% of Americans plan to travel this summer, and the “Big Four” - United, Delta, American and Southwest - U.S. domestic airlines agree that leisure travelers are rapidly returning to air travel over the next couple of months.

So, the big question: when will businessl rebound? When will companies feel it's safe or justified to resume business travel again?

While virtual meeting technology provides better efficiency for both time and money, nothing can replace the unique aspects of attending trade shows, events and business meetings in person. One of the biggest losses from virtual meetings is what happens before, around and after those main live events. Beyond the planned programming, business executives can network, catch up on long overdue discussions and book additional appointments around the city of the main event - all while masked and sanitized.

Let's look at three areas of lost networking opportunities when business travelers can't do inperson events. Informal Meetings

Sharing a Meal: Before or after the formal meeting, many smaller groups break out for dinner to allow for exponential returns of relationship-building or sharing of additional ideas. In fact, 77% agree that a main benefit of face-to-face meetings is the ability to read others' body language and expressions something not easily done via video conferencing or phone calls. In the Halls: Between sessions, coffee breaks provide side meeting opportunities to connect with new contacts or catch up with old friends. The power of networking “in the halls” is invaluable and makes a difference when 50% of closed-won opportunities consist of two meetings or more. Dedicated Time & Attention for Connections

Face-to-face meetings are of greater significance to all when some or all attendees traveled to the destination in order to participate. Events allow for carved-out time from typical office meeting schedules to talk business and help get the most ROI out of traveling. 84% of remote workers actually prefer to meet in person when possible to make these important connections.

These factors make the in-person meetings more impactful and produce better results, such as closing more sales, building better relationships and expanding your network, than the instant sign-on and sign-off of meetings. Furthermore, a TripActions survey reported 90% of respondents said that business travel is essential to company growth. The desire and organizational need for business travel is apparent, and now it will be put to the test. The Good News: Events Are Coming Back

In the U.S, several cities are reopening to some degree for business trade shows, including Las Vegas, Orlando, Dallas and Atlanta:

•Las Vegas is currently allowing meetings and conventions at 50% capacity or 250 people before June 30. It's been reported that statewide restrictions will lift June 1, except for face coverings, which will still be mandated. • Orlando's Orange County Convention Center is open, following CDC Guidelines, without reduced capacity requirements. Orlando's New6 reports the convention center will have 95,000 attendees for their upcoming spring and summer events. Interestingly, New6 notes that the convention center will also remain a regional COVID-19 testing and vaccination site, coinciding with forthcoming meetings and events.

• Dallas' Kay Bailey, Hutchison Convention Center, will host two events where I will be in attendance representing Nomadix: AAHOA 2021 in August and HITEC 2021 in September. The convention center has a full schedule of events starting in June of this year.

• Atlanta's GWCC and GICC are both open and follow CDC guidelines for social distancing.

These attendance numbers illustrate the demand and acceptance for moving back to in-person, traditional events. Conferences and events are the key to bringing business travel. And for those still a bit wary, the CDC provided guidance that assures fully vaccinated individuals may travel freely (domestically) without a need for testing before or after their flights, as long as they wear a mask, avoid crowds and wash or sanitize hands frequently. All of this is excellent news for the travel and hospitality industry.

The reopening of these top U.S. convention cities will not only kick off increased business travel but sustain it into the future as well. After an in-person large trade show, the business that originated there will continue with the appropriate mixture of business travel and video calls, all bolstered by a live experience.