Should my Float Center Have Dynamic Pricing? – DSP 201

Dynamic pricing AKA changing prices based on demand or availability, is a pretty common tactic in certain industries. Airlines do it with tickets. Restaurants and bars do it with “happy hour” to get people to come in during slow times.

Graham and Ashkahn weigh in on this practice as it pertains to the float industry and, if you are going to do it, how to do it right so you get the most bang for your buck without confusing your customers.

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Transcription of this episode… (in case you prefer reading)

Ashkahn: Okay, my name is Ashkahn.

Graham: I’m Graham. And today’s question is, “have you ever considered dynamic pricing based on a dwindling number of available appointments? Or differential pricing based on typically more busy and less busy times of your day/week?”

Ashkahn: Okay.

Graham: Supply and demand for the econ majors.

Ashkahn: Which we are not.

Graham: Yeah, thank you for clarifying. That was a great question by the way.

Ashkahn: Let’s maybe, let’s maybe-

Graham: Everyone else should also send great questions along. You should just-

Ashkahn: So the question is, have we ever considered pricing the changes based on-

Graham: Anything, just pricing the time of day or supply. Like how many appointments are available that day.

Ashkahn: Yeah, yeah.

Graham: That’d be line an airline kind of model.

Ashkahn: Yeah I guess. Who knows what the hell airlines are doing? But something like that. Some sort of mix of those two things.

Graham: I think I have my finger pretty tightly on the post of airline pricing.

Ashkahn: Who knows what crazy algorithms that they use to set their airline ticket pricing?

Graham: I’m who they come to when they need help.

Ashkahn: Yeah it’s an interesting-

Graham: So we haven’t-

Ashkahn: No, well kind of.

Graham: Oh nevermind, yes. Yes, absolutely. You have to be a fool not to.

Ashkahn: So we do run longer floats at night for the same amount of money.

Graham: And they used to be more money.

Ashkahn: They used to be more but still, the cost per minute of float time went down in the middle of the night. And you could kind of call it a happy hour floater. You know what I mean? We were doing cheaper floats in the middle of the night.

Graham: Per minute.

Ashkahn: Very much because it was the middle of the night.

Graham: Yeah and so a little background is we only offer floating at our place. We do two different lengths of services. We have 90 minute floats and we have two and a half hour late night floats.

Ashkahn: Yeah.

Graham: And 90 minute floats are the bulk of what we run. We’re a 24 hour shop, so starting at seven AM we run 90 minute floats up until 11 PM, at which point we switch to two and a half hour late night floats. So then we run from 11 until 1:30. And from 2:00 until 4:30.

Ashkahn: Yeah.

Graham: And so that’s just kind of again, to give you a little breakdown of the Float On offerings that we have. So you can kind of, what Ashkahn’s saying is you could kind of call that two and a half hour late night float like changing your price and then length of float and making it a better deal because it’s in the middle of the night.

Ashkahn: Which is basically the question is, is there a benefit to incentivizing, financially incentivizing time of day? Or as ask capacity fills up? My gut feeling is that basing it off of capacity like live, like prices adjusting as appointments get booked sounds a little too sophisticated maybe for exactly what we need because at the end of the day, our schedule can be relatively predictable. We know weekends are more popular. We know evenings are more popular. We know really early evenings are less popular.

Graham: If you’re in Portland, which is a very light racing town for example.

Ashkahn: Yeah, it’s not like there so much fluctuation to the point that I would almost even want to add that level of complexity to my business. Or that level of complexity to what my customers are thinking when they’re trying to book floats that there’s this variable cost based off of capacity thing going on.

Graham: That’s very much my thought with this too is I really try to steer away from any complexity in pricing. And so adding on, especially something where it’s like every day the prices could be different depending on how that day specifically is field. Just sounds like a lot to ask your customers to absorb.

Ashkahn: Yeah.

Graham: And even we have to fly around the country and the world for different things that we do. We’re very important. We fly all over the place.

Ashkahn: Sometimes we take buses.

Graham: But honestly, it’s such a burden, I understand why you would want to hire a travel agent. Because just taking the time to compare all these different prices and they change day by day. And you’re like, “well should I wait another week to buy it?” There’s a lot of effort that goes into doing an airline flight because we need airlines to travel across the country, we kind of put up with it.

Ashkahn: Yeah.

Graham: So I worry because people don’t really need floats. So the more you complicate things with changing prices every single day. Or even if they’re fixed, but they never know, they have to look at your menu in order to figure out whether Tuesday is $55 or $75 just sounds- We only have so much cognitive capacity. It takes a lot of energy to think. We’re a lazy culture. It just sounds hard for your customers.

Ashkahn: Well I guess I’m not sure we have a sophisticated enough business or business model to.

Graham: Plus I don’t even know how you’d do it. I don’t know the software that would run that.

Ashkahn: Assuming you could get a piece of software that did that, right? It just sounds to me like a little too much sophistication for the problem, which is hey, we should try to fill unfilled appointments.

Graham: I do have a favorite solution that I’ve seen to this, which is along that vein.

Ashkahn: Yeah.

Graham: Which is just not putting in on your main menu as an option. Even if you’re planning on offering it, let’s say for a year as a trial to do cheaper 7:00 AM floats or cheaper 1:00 PM floats or something like that. And instead you’re choosing a group from your mailing list, or you’re choosing a set amount of-

Ashkahn: So we’re past the idea of capacity-based. You’re just talking about time-based?

Graham: Yeah, so past capacity-based. Just going onto the idea of filling up your slower times in a float center with some cheaper floats.

Ashkahn: Yeah, because I will say, before we get into the details, I will say that idea to me sounds more in line with both the reality of running a float center, and I think there’s some appealing aspects to it. There’s pitfalls and stuff, and we can get into that, but yeah we just know there are lighter times in the day than there are others. And discounts are how you incentivize people to do things. So using discounts to incentivize people to book less popular times feels to me like a very logical conclusion.

Graham: And that yeah, and that’s how I’d offer it too. Is as a discount. Not as if you float at this time of day, then floats are this price. Or something like that necessarily. Like 7:00 AM floats are just this price.

Ashkahn: Right.

Graham: I really like the idea of keeping your menu again, as simple as possible.

Ashkahn: It’s like the happy hour. It’s the happy hour concept.

Graham: Yeah, yeah right. And then only in my mind you’re also not saying on your menu, “happy hour is every day from this time to this time.”

Ashkahn: But you are required to buy a drink to get the float price. I’m following you. I’m with you here.

Graham: Really? Because based on what you’re saying it really seems like you’re almost having-

Ashkahn: And you can’t take the floats to go. I got it.

Graham: -A separate conversation that I’m having. Right? So you can email select groups though.

Ashkahn: Yeah.

Graham: You can make offers to even just whole new people, first timers on weekdays get a cheaper option. And make that available for a set amount of time. And maybe after running these experiments for months or a year or something, you settle on one kind of amount of time. And one group of people or something like that, that works well. And then you can turn it into more of an ongoing policy. But I would really be hesitant, especially as a new center opening up, but even as an existing center, kind of making changes to my menu to launch right into on the menu saying, these times are cheaper.

Ashkahn: Yeah.

Graham: Basically Monday through Friday, 1:00 to 5:00 PM, that we’re just going to offer cheaper floats during that time. Because our weekdays during the days are less booked, right? Because then people get used to that, and you have to correct the menu if you decide to change it. It’s so much less risk if you do it as a discount. You don’t have to make it available to everyone, which means you might still have people paying full price during that. So I guess my personal favorite way that I’ve seen this implemented, and I have seen centers do it, where they do have early morning floats or midday floats are cheaper and it’s just permanently attached to the menu.

Ashkahn: I’ve also seen membership structures kind of build around it. So I’ve seen this tier of membership gets you whatever. Unlimited floats during these times of the day/week. And then this many floats on the weekend. Or to pay you can use these floats, memberships that only lets you use your floats during those non-busy times. And then there’s a higher paid tier where you have the same amount of floats but you can book them whenever. So I’ve seen kind of that logic built into it before too.

Graham: Yeah, which is interesting as well. I don’t know. We’ve never played with any of those ourselves.

Ashkahn: No.

Graham: So it’s kind of interesting. The closest we’ve come is we’re just now probably about to launch some select mailers with discounts out to people for 7:00 AM floats. And we haven’t really done times of day that are our regular links of float that are discounted ever as float-on.

Ashkahn: It’s amazing how complex discounts can get right away. As soon as you start offering all these different pricing options, then other discounts start combining in with it. And all of a sudden the complexity of booking an appointment goes from just choosing a time that works for your schedule to all of a sudden having all these choices to make and trying to figure out what the best deal is. And balancing that against something else.

Graham: And choice paralysis is real. If you give someone too many options, even if they were excited about one or two of those options to begin with, they will not choose any of them.

Ashkahn: And  trying to book with friends sometimes. So then someone has to go back to their friend and be like, okay so here’s the deal. We could book at this time and it’d be cheaper. We could do this. It can add friction to the system. Not that that should deter you from doing anything ever or having any more than one price. But it’s like the burden that comes with every discount or incentive or marketing plan that you do. You always have to think of the fact that you’re adding one more layer of complexity to your pricing.

Graham: Yeah. So again, I think I like to just list pricing everything at the same regular price regardless of time of day, day of week.

Ashkahn: Yeah.

Graham: And then depending on what you’re filling up, and when your customers are coming in, choosing groups, or your entire mailing list or whatever it is. And doing more select offers during your slow times to see how those work.

Ashkahn: It’s nice when you’re testing things too. If you choose a group of people and they’re like, hey, let me just reach out to this specific group of people and see if I can offer them cheaper early afternoon floats or something. It might fail horribly. You might realize that the price you were thinking of offering, it just is not enough to motivate people to change their schedule around or to come at a time that’s not as convenient for them. And great, now you can just sweep it under the rug and you don’t have to change your pricing and do all sorts of crazy stuff like that.

Graham: And now you’re customer-base, that  just had to get used to your new crazy pricing with all these options. Not it’s to get used to a whole new menu if you go that route and make it permanent. So yeah, the impermanent discount schedule, especially again, for dipping your toes in the water and testing this is how is, in my mind, the sanest way to do it. Like Ashkahn said, you can just wipe the slate clean if anything goes wrong. So that would be my personal advice kind of launching into this idea, if you do want to test it out.

Ashkahn: Yeah, I think it’s basically I like the concept and I would just tread very carefully and take a baby step forward at a time to kind of figure out what works and where’s the right spot and the right way of presenting it. And just really keeping an eye on not having it totally change the structure of your business right away.

Graham: Yeah, and definitely keep your offering simple even within that. If Monday has a different price than Tuesday, which is different from Wednesday and Thursday, all of that starts to get a lot to absorb. If all you have is a weekday during business hours, nine to five on Monday through Friday, it’s cheaper. And everything else is the same. That’s something people can absorb. Or only 7:00 AM’s are cheaper. Something that people can absorb. So even if you go the route of just emailing out discount codes, still try to keep what those discount codes are for digestible. And singular and very understandable in an easy way. And don’t mix too many things in there.

Ashkahn: Yeah, when you have so many deals going on, I think it can just be exhausting for customers. When something like that is happening, and I’m trying to buy something, I almost feel like a responsibility to try to make sure I get the best deal I can. That’s why buying plane tickets, I don’t just hop on and be like, this one looks good. It takes two hours of being like, “well let’s look at this other site too. It might be $13 cheaper if we fly through Nebraska.” Our brains just kick in to strategy mode or something. There’s something just nice about being like, this is the price. I’m just going to pay it. I don’t have to think about it anymore.

You just kind of know you want to go in for a float and that’s what the deal is.

Graham: On a side note, it’s also one of the reasons I don’t like discounts in general, is it feels like that same game happens in people’s heads where they don’t know whether they should wait an extra week because you might launch a discount. Or should they wait around for the next Groupon to come out? And if you’re training your customers, just expect a single full price or getting a membership, then yeah, they don’t through any of that. And they’re like, oh should I get a float there? Oh wait, no. Should I wait for a discount? There’s not a discount coming. I should just go ahead and buy the float or get a membership is such a clean thing to embed in people’s heads. So this is a form of that same thing of discount, but the lessons apply to any discount out there that you’re offering.

Ashkahn: Yeah. So good luck.

Graham: Don’t let us deter you.

Ashkahn: Don’t let us deter you. It doesn’t sound crazy like again, different pricing for different times of day or busier and less times to me sounds like a kind of justifiable way to think about your pricing model.

Graham: And there are float centers out there for sure doing it. I don’t personally know exactly how it’s going for them unfortunately, or I’d give you some more data. But they’ve been running it for over a year or two. There are people who seem to be enjoying that structure. So you’re also not going in just untrodden territory.

Ashkahn: Yeah that’s true. And our 7:00 AM’s really don’t have as many people as things like 7:00 PM.

Graham: Yeah we’ll see how that goes.

Ashkahn: So it’d be nice to fill empty tanks with things like that.

Graham: Yeah, yeah. And if you have any more questions go to floattanksolutions.com/podcast.

Ashkahn: And we’ll see you then. If you type stuff in there, we will see it.

Graham: Every letter you type in there, if you hit submit, we will see.

Ashkahn: We will see it. We’ll see it.

Graham: And we’ll read it aloud to other people.

Ashkahn: Yeah.

Graham: Alright.

Ashkahn: That’s it.

Graham: Yeah I think we’re done.

Ashkahn: Alright, have a good one.

Graham: Yeah, good work everybody.

Ashkahn: Yeah, we’ll see you later.

Graham: Call it a wrap.

Ashkahn: Call it a wrap

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