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Why Intercity Bus Companies Should Have a Dynamic Pricing Model

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Why Intercity Bus Companies Should Have a Dynamic Pricing Model

August 12, 2019
Dynamic pricing for bus and coach

While dynamic pricing strategies have long been used by airlines, it is a late-blooming trend that is now sweeping across the intercity bus industry.

At its core, dynamic pricing is the concept of selling the same product at different price points to different people. The idea is that you can generate more revenue by offering customers the right price at the right time. This translates to less empty seats on your coach buses!

Dynamic pricing model explained

Image from Price Intelligently

While this can sound really complicated, it can all be set up in a manner of days with the help of a leading reservations company.

Dynamic pricing and revenue management open a window into your own business. It allows you to pinpoint the weaknesses in your system, as well as identify the strengths. It also enables you to have all your data in one place.

Who Should Offer Dynamic Pricing?

If your coach buses are travelling with excess open capacity and you’re looking to increase profitability for your organization, there are 3 key criteria you need to meet in order to implement this type of pricing model:

  1. Apply origin-destination pricing
  2. Sell tickets in advance
  3. Utilize a reservations system with capable technology

There are also business goals to consider.

Does your bus company hope to gain a competitive advantage over competitors by appearing to be priced better?

Perhaps you want to maximize revenue during peak travel times when passengers are willing to pay more for their ticket.

Alternatively, you may want to attract a brand-new market segment with cheaper prices that entice ridership during off-peak periods.

Increase bus ridership with dynamic pricing

Why This Model Is Beneficial For Intercity Bus Companies

Airlines have been implementing dynamic pricing for years. They use it to maximize revenue opportunities, basing ticket prices on relative supply and demand. As they have to be competitive in the online space, comparable lower prices appeal to the price-savvy online market.

The same applies to the bus industry. Fixed pricing models can leave you with empty seats, usually in off-peak travel times when lower demand does not motivate passengers to pay the same price as those who travel during peak periods.

Dynamic pricing takes into account market trends, ridership capacity, as well as customer and competitor data. It then uses this in an algorithm to set competitive ticket prices that sell more inventory.

Everything is dependent on the technological capabilities of your bus company’s reservations and ticketing platform. More specifically, its ability to keep an inventory of ridership capacity. As dynamic price ranges are calculated against supply and demand, this data needs to be available in real-time.

Applying the model can win over customers with fares that are more attractive in times of low demand. The decreased price can be what is needed to incentivize ticket sales, distribute ridership more evenly, and meet capacity goals.

Similarly, the greater the demand for a ticket, the higher the price surge. As long as you remain in line with your competitor's fares during high-demand transit times, passengers are often willing to part with the increased rates to secure their seat.

Overall, there is value in it for everyone, not only you as the seller. Using an equilibrium price to level out revenue, you can distribute demand more evenly throughout the day. You fill seats that would otherwise be empty, and passengers pay in-line according to ticket demand.

Dynamic pricing model to increase ridership

Dynamic Pricing Effect on Revenue Management

Your bus ridership capacity is quantifiable and has a limited lifespan, i.e expires either when tickets sell out or the bus undertakes its journey. In this space, effective revenue management means optimizing ticket availability and price so as to maximize sales.

Dynamic pricing is, therefore, a tool to help your business sell seats to passengers at a price they're willing to pay at a specific point in time on a particular sales channel.

Reservations platform with dynamic pricing

When is A Dynamic Pricing Model Not Suitable?

Dynamic pricing is not necessarily suitable for every bus company. Certain business models do not warrant the differentiation in pricing. These can include:

  • Frequent transport service providers such as airport shuttles which do not need to keep track of passenger capacity
  • On-board or offline ticket offices – when using these purchase channels it’s generally indicative of a passenger’s willingness to pay full fare

Final Thoughts

We haven’t touched on the best implementation strategies or price-setting methods in this article, as there’s a lot to consider. Overall, the importance of a data-driven pricing strategy in the competitive online environment should not be overlooked. In particular, dynamic pricing lends to the origin-destination pricing model where tickets can be booked in advance.

 

Our own innovative reservations and ticketing platform offers bus companies dynamic pricing implementation. Get in touch with us for a demo today.

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