Business Optimization

Realtor Pricing Strategies: How Realtors Can Price Their Services

As realtors transition to a new model of pricing their valuable services, they may be wise to take a page out of other professional service-based businesses. No longer tied to a standard commission fee, realtors will be able to optimize revenue by customizing their services to fit the need of an individual consumer. And great realtors will be able to price according to their expertise and proven results.

Changing a realtor pricing strategy can be daunting, but taking a deliberate approach can yield significant results. Key steps to a successful pricing strategy include:

  • Inventory the products and services you provide.
  • Price individual products and services.
  • Package and bundle products and services to provide the most value.
  • Effectively market and sell your realtor pricing strategy.

Let’s take a look at how real estate professionals can optimize pricing of their services.

Inventory products and services you provide

Realtors have traditionally provided a wealth of services, all wrapped into a real estate agent commission. Realtors can develop an initial inventory simply by "unbundling" those services. For example:

For potential buyers…

  • Finding and showing homes
  • Negotiating price and closing costs
  • Assisting with finding and securing lenders
  • Arranging and managing inspections
  • Contracting

For home sellers…

  • Providing consultation on making a home ready to sale
  • Staging a home
  • Researching past sales to determine the best sales price
  • Photography and videoing to prepare for advertising
  • Advertising and sourcing prospective buyers
  • Conducting an open house
  • Contracting and closing the sale

All these services offer value to the customer, but not all are necessary. Giving customers choice is a good first step in a successful strategy.

Pricing individual products and services

Determining appropriate pricing for each product and service is difficult, but past data will give you insight. You should also examine the amount of time it takes to provide the service and what external resources are required.

In the past, real estate agents used a tiered pricing strategy based on commission. The more expensive the home, the more money the agent would make. The commission percentage remained the same regardless of the home's price. But not all services lend themselves to variable pricing. Your strategy is likely to be a combination of a few pricing approaches:

Realtor Article Graphics

Fixed Fee: You can charge a flat fee for services like consultation, researching past sales, hosting an open house, or preparing contracts.

Good Better Best Dial

Good, better, best pricing: Offering levels of quality in photography, video, and staging to accommodate both those on a fixed budget as well as those wanting to stand out from the rest.

Money Sign On Scale

Variable pricing: Staging a home, photography, or video service may vary based on the size of the home or number of rooms.

Realtor Article Graphics (1)

Tiered pricing: Selling an expensive home with a limited number of eligible buyers will often take more effort and resources than a more moderately priced home, including advertising, sourcing buyers, and time spent showing the home. Tiers of pricing for homes within given price ranges could be more effective than a straight percent of the sales price, but a percent of the asking price may be a great starting point.

Regardless of what methods you use, transparency is key. Customers want to know what they are getting for the price paid, and in this new world, what they are not getting. Also consider the intrinsic value you provide which may or may not be on par with your competitors. A successful, in demand realtor will be able to charge more, provided the value they bring is readily apparent.

Packaging and bundling products and services

After determining prices for individual services, you can group products that customers often buy together to improve increase the average transaction value and encourage repeat business. Consider the following when bundling services:

  • Manage the number of bundled products: Consumers can quickly become overwhelmed with choices. Package services customers are most likely to want or need, versus every combination possible. You can also offer complete customization, but many will not want to take the time to study the options, particularly with a transaction they do infrequently.
  • Focus on value: Introduce economy bundles for more frugal consumers who may just want to try and sell on their own, but need help with the basics (consultation and contracting for example). Building the relationship can lead to a larger contract if their “go it alone” approach does not result in a sale. Save steeper discounts for stronger bundles of services such as one-stop shopping for all their home sale needs.
  • Make it intuitive: Allow consumers to easily see the value in moving up to a higher priced bundle. A good, better, best strategy can work as well with bundled product as it does with individually priced services.

The key to strong packaging and bundling is providing what consumers want, at a good value. Making it easy to do business with you is important when consumers have options.

Market and sell your pricing strategy

Discussing pricing will be new to most realtors. Effectively marketing and selling your pricing model will make the discussion easier. Keep in mind that it may be new to you, but consumers are accustomed to buying services through many types of pricing plans.

To effectively market your pricing:

  • First sell yourself: You can be the highest priced realtor in the market (someone will be!), but if the value you provide warrants the price, do not be shy. Make sure your website touts your experience, specialties, and success rate. Use testimonials from past clients to convey what you do well. For such an important undertaking, people want to know more about you.
  • Focus on value, not price: Someone may be able to find and hire a photographer for slightly less than you, but they bear the burden of scheduling, meeting the photographer, conveying what they want, and hoping the quality is good. You take the risk out of the equation and that has value. The same goes for bundled products and services. Convey the value or savings from purchasing more services – ultimately, everything you provide – by making the steps up the pricing curve easy to take, not steep.
  • Visually display bundled services for a quick read: Consumers have little patience when it comes to figuring out how much something costs. The longer it takes, the more skeptical they become. Be transparent. Be bold. Be clear and concise.
  • Avoid any notion of nickel and diming, hidden fees, or surprise charges. Trust is paramount. Earn it and keep it.

While the new normal may be jarring at first, embracing the change on pricing services will eventually pay dividends. Now is the time to get control of your own destiny versus letting consumers make you an offer. Your expertise is worth the price.

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About Integrated Insight

Integrated Insight is an analytics consulting firm formed in 2009 by a team of past Walt Disney Parks & Resorts executives. With decades of experience at Disney in research, data analytics, pricing, revenue management, labor management and operational efficiency, Integrated Insight helps for-profit businesses and not-for-profit agencies reach their full potential. We marry our real-world experience with robust analysis of your business to find viable solutions to complex situations, and identify untapped opportunities for topline and bottom-line growth.

Learn More →

 

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How the Burden of Choice Impacts Your Customers

Your customers can feel immobilized by the number of choices presented to them. The ultimate balance any company should aim to strike is the one between consumer appeal and higher sales and revenues.

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Marketing strategies to drive growth

Fundamental Marketing Strategies to Drive Business Growth

A thoughtfully designed marketing strategy can shape brand image, build brand equity, and boost profit. This article will explore the fundamentals of a strategic marketing approach to improve outcomes.

For many, marketing strategy can seem overwhelming and confusing. Especially since every business and industry will require different approaches.  According to Hubspot, only 61% of marketers believe their marketing strategy is effective. Additionally, Forrester reports that 58% of marketers are challenged with targeting or segmenting their audience. Marketing strategies don’t need to be challenging. In this article, we will share the basics of forming an effective marketing strategy.

Who Is Your Consumer?

First, a business needs to understand who their consumer is, what the perception of the brand is, and where the consumer is coming from. This is where market research comes in. If you haven’t been conducting research within your organization, or have never done a market research study, don’t skip this step. It’s crucial to get acquainted with your current consumers, identify how they perceive your brand, and identify potentially untapped market segments.

Segment Your Consumers

Conduct research with the intent of segmenting your consumers. By dividing your customer base into groups of individuals who share similar characteristics or traits, you can tailor your marketing strategy to better meet the needs and preferences of each segment. According to Hanover Research, companies that cater messages and products to customer segments earn 15% more profit than those that don’t.

Customer segments can be grouped based on demographics, product preference or usage, and other behaviors. Customer segmentation research can help define your segments.

Customize Your Value Proposition

It’s time to be strategic about the company’s value proposition. The consumer value proposition answers: what value do you provide for your customers, and which one of your customers’ problems are you helping solve? Your value proposition will vary across customer segments based on their unique needs.

For example, for a family, a new SUV could mean more space to travel comfortably and safely, with peace of mind. For another segment, such as an outdoor enthusiast, an SUV could mean more space to pack in gear, more adventure, and living the life they’ve always dreamed of.

Recreational Family

Recreational Family

Outdoor Enthusiasts

AdobeStock_628247551

To create custom value propositions, ground yourself in your segments, ideally through personas, and get to the core emotional value of your product. Once you have finalized your positioning statements, it’s time to deliver your message to your consumers.

Message Your Value Proposition to Your Customer Segments

Tailoring your messaging is a crucial strategy for targeting your consumers effectively and developing content and messages that resonate. According to a survey by Infosys, 86% of consumers say that personalization has some impact on what they purchase; and one quarter admit personalization ‘significantly influences’ their buying decisions.

The graphic below shows an example of potential marketing assets and messaging for different customer segments of an outdoor resort and spa. When creating new ad campaigns, segment the marketing message and assets for each demographic based on core emotional drivers.

Consumer Segmentation
Deliver the Message At The Right Time, In The Right Place

Sending the right message, on the right channel, at the right time is crucial to spending your marketing budget wisely. Taking insights from the research and using demographic profiles, determine the appropriate channel selection to most effectively reach your consumers. According to a Statista survey, “Facebook is generally the most popular social network for digital shoppers in the United States. Nevertheless, examining age-related preferences revealed that young adults aged 18 to 34 in the U.S. showed a stronger inclination toward Instagram.” This is a great example of researching platforms to guarantee that the right consumers are targeted on the right channels.

Ensuring that you select appropriate channels to reach your targeted audience will decrease the risk of spending advertising dollars on consumers who are not interested in your product.

Track Your Performance

Organizations often ask, how is my marketing investment performing? Or they wonder if their campaigns are working. Measuring your campaign and targeted marketing initiatives using relevant KPI’s and analytics tools will bring clarity to your campaigns. For digital marketing, tracking tools such as Google Analytics 4 and social media insights can track campaign metrics in real time. Looking at revenue and comparing your campaign to a similar campaign or a similar time-period is another strategy to use. For brand campaigns, conducting a brand lift study is a cost-effective way to gauge how marketing efforts impact brand awareness and health. By tracking campaign performance, you can make data-informed decisions and continuously adapt strategies to meet your goals.

Following these strategies will help you effectively target consumers, increase engagement, drive conversions, and create brand awareness, ultimately achieving your business goals and increasing your bottom line.

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About Integrated Insight

Integrated Insight is an analytics consulting firm formed in 2009 by a team of past Walt Disney Parks & Resorts executives. With decades of experience at Disney in research, data analytics, pricing, revenue management, labor management and operational efficiency, Integrated Insight helps for-profit businesses and not-for-profit agencies reach their full potential. We marry our real-world experience with robust analysis of your business to find viable solutions to complex situations, and identify untapped opportunities for topline and bottom-line growth.

Learn More →

 

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Realtor Pricing Strategies: How Realtors Can Price Their Services

As realtors transition to a new model of pricing their valuable services, they may be wise to take a page out of other professional service-based businesses. No longer tied to a standard commission fee, realtors will be able to optimize revenue by customizing their services to fit the need of an individual consumer. And great realtors will be able to price according to their expertise and proven results.

Read More
Theme Park Food

Optimizing Revenue Potential with Ancillary Pricing: Theme Park Food and Beverage Case Study

Discover how a major theme park achieved a 20% boost in EBITDA by optimizing food and beverage pricing strategies.

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How Can We Help?

Schedule a free consultation to discuss your business needs.

Theme Park Food

Optimizing Revenue Potential with Ancillary Pricing: Theme Park Food and Beverage Case Study

Driving 20% Improvement in EBITDA Through Food & Beverage and Merchandise Pricing

Project Background

Integrated Insight worked with a major theme park to assess revenue optimization strategies for food and beverage. The client was experiencing increased demand following a recent expansion period and the addition of new rides, and sought to capitalize on these successes through new pricing opportunities.

The project was initiated through a discovery phase, in which Integrated Insight worked with management to obtain all the information required to perform analyses. Data collected included lists of all food & beverage items; transactional data for revenues and per cap spending for all products, broken down by day, location, and guest segment; pricing history, including promotions; menu boards by location; monthly parks and resorts attendance; and more.

From the data provided and in conjunction with marketplace and competitor information collected by Integrated Insight, we were able to conduct both a qualitative and quantitative analysis of pricing. The analysis began at the lowest level of detail to understand opportunities that were hardest to reach. Our work included detailed data analytics to better understand where there was more opportunity and whether initiatives being undertaken were delivering expected returns. The focus was on driving incremental volume and rate improvement that is sustainable over time.

Theme Park F&B Revenue Optimization Recommendations

Key findings from the analysis included steady revenue improvement following the introduction of several new themed items, better performance due to a stronger mix of quick and full-service venues (compared to food carts at other areas of the park), higher penetration rate for food purchases, and generally positive sentiment towards food service and availability.

Top revenue optimization recommendations derived from the analysis included:

  • Implementing stronger and clearer price stratification on all products, giving guests choice and making it easier for them to move into higher spending options
  • A mix of modest price increases and decreases, strategically placed and married with better marketing tactics, to maximize profits while not negatively impacting guest perceptions
  • Introducing digital menu boards to enable greater flexibility in pricing and menu options, optimized product placement, and improved brand perceptions
  • Leveraging under-utilized assets, such as characters and other IP, to appeal to guests seeking more experiential dining
  • Conducting better and more frequent guest behavior research to better accommodate demands and customize product offerings
  • Introducing higher-end alcoholic and non-alcoholic beverages, including themed products.
Results

The immediate action items in the recommendations called for a 12% improvement in EBITDA. An additional 8% increase was identified through longer-term initiatives, which took into account the projected capital expenditures associated with new digital menu boards and updated systems support.

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About Integrated Insight

Integrated Insight is an analytics consulting firm formed in 2009 by a team of past Walt Disney Parks & Resorts executives. While at Disney, the founders of Integrated Insight had responsibility for Food & Beverage and Merchandise revenue, which were each $1B businesses.

With decades of experience at Disney in research, data analytics, pricing, revenue management, labor management and operational efficiency, Integrated Insight helps for-profit businesses and not-for-profit agencies reach their full potential. We marry our real-world experience with robust analysis of your business to find viable solutions to complex situations, and identify untapped opportunities for topline and bottom-line growth.

Learn More →

 

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Improve Parking lot layout for businesses

Improving Parking Lot Layouts For Businesses: Parking Your Way to Improved Customer Experience

When working with clients, our first glimpse of where customer service can be improved usually starts in the parking lot. Making it easy for customers to park, safely walk to the establishment, and ultimately find their car once they return, can make for a better overall experience. When it is time to repave or repaint your lot, consider improving your parking lot layout.

Here Are Six Considerations To Improve Your Parking Lot Layout:

1. Parking Lot Capacity

Does your lot barely hold the number of customers you have at any given time of day? Do you believe you may be losing customers on a regular basis due to lack of adequate parking, not just during a few peak days a year? If so, you may want to consider changing your lot layout to improve density. In most cases, a perpendicular (90° angle) spot is the most efficient. However, depending on your specific dimensions and restrictions, angled parking may be more efficient. It may even be worth considering one row of angled spots if you do not have space for an additional perpendicular spot row. These designs may  maximize the number of spots available, but  make it harder for customers to maneuver.

Top view of colorful car row on a parking lot, grey asphalt vehicle park with one last free spot left in diagonal angle slots, flat cartoon banner of city transport space - vector illustration

You should also consider how you balance customer experience with parking density. Creating an inviting, easy to maneuver lot creates a better first and last impression if you have the space to do so. In most cases, you can expect to need 310-330 square feet per parking spot including cross aisles and entrances.

2. Frequency of Arrivals and Departures

Are most of your customers parking for an extended period (a work location, a convention center, a school, etc.) or do customers come and go frequently (a grocery store, a convenience store, a shopping center, a restaurant, etc.). The more frequent the turnover, the more likely angled parking will work well. Drivers can enter and exit angled parking spots faster than perpendicular. They are also more likely to line up in the center on the first try, versus backing up and repositioning to avoid opening doors and hitting the car next to them.

3. Pedestrian Flow

Ideally, your parking lot will be laid out such that the aisles are perpendicular, not parallel to the main establishment. This allows customers to walk down the aisle in which they parked and usually cross over traffic once. If rows of parking are parallel to the building, customers are typically crossing multiple aisles, increasing their chance of encountering an oncoming car. If space is not a serious constraint, consider walking paths between aisles to remove customers from car lanes as much as possible.

4. Vehicle Flow

Parking aisles can be designed to handle one or two-way vehicular traffic. Moving all traffic in the same direction reduces the potential for vehicle accidents, requires less space per aisle, and allows pedestrians to focus on oncoming traffic from one direction. But it also requires drivers to thread up and down aisles in search of a space, if lots are often full. If 90% parking is in use, two-way traffic is a must given customers will be otherwise confused of which way to exit.

When designing the location of drive aisles, try to place them parallel to the longest edge of the lot. In other words, a rectangular lot that is wide east/west should have main drive aisles running east/west. In most cases, this will provide the most parking density. For larger parking lots, 30 spaces between cross aisles is a common standard.

A blue car is about to park in an empty parking space
5. Signage

A little signage goes a long way. Consider the following:

  • Designate accessible parking with standing signs, clearly visible from a distance. Drivers should not discover a spot is for accessible patrons from painted signs on the pavement, after they start to pull in. Likewise for spots designated for picking up an order.
3D disabled parking space with its signage on the ground and its information panel with the symbol of the wheelchair (cut out)
  • If customers are infrequent visitors and the lot is larger, all aisles should be labeled. This can be done with standing signage which also encourages customers to take a quick photo, or on the pavement. If on the pavement, it needs to be regularly painted.
  • Consider numerical or lettered systems versus colors or unique names. Is the Red aisle before or after the Yellow aisle? Is the Giraffe aisle before or after the Lion?
  • All standing signs should be tall enough to see over vehicles.
6. Overall Safety

When doing guest experience research, we see patrons express concerns of safety in the parking lot, which translates to a negative guest experience. Here are some considerations to improve safety:

  • Generous use of strong lighting will keep your customers safe and thieves at bay.
  • Minimizing the number of curbs and concrete barriers that are necessary will avoid pedestrian accidents. Even pedestrian walking aisles can be accomplished without erecting many barriers. Consider effective landscaping which is also more appealing.
  • Any potholes or broken pavement are accidents waiting to happen.

Never underestimate that making a good, first impression can pay dividends. For many businesses, that first impression is the parking lot!

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About Integrated Insight

Integrated Insight is an analytics consulting firm formed in 2009 by a team of past Walt Disney Parks & Resorts executives. With decades of experience at Disney in research, data analytics, pricing, revenue management, labor management and operational efficiency, Integrated Insight helps for-profit businesses and not-for-profit agencies reach their full potential. We marry our real-world experience with robust analysis of your business to find viable solutions to complex situations, and identify untapped opportunities for topline and bottom-line growth.

Learn More →

 

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Basic Guide to Process Improvement: A Structured Approach to Optimizing Your Operation

The most successful companies are those that can continuously adapt to meet the changing needs of the consumer and their business. Process improvement can be overwhelming, and it can be difficult to know where and how to start.

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New experiences and facilities require a high upfront investment, and often are difficult and costly to adjust after building. And so, strategically building the right amount of capacity for the right guests can save a number of headaches later. This article lays out the major steps to planning capacity using a guest-centric, analytical approach.

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Foundational Approaches to Achieve Operational Efficiency

Focus on foundational approaches to operational efficiency to avoid excess costs, unnecessary frustration for both customers and employees, and lower quality products or services. Often companies focus on “big picture” initiatives, resulting in company-wide standardization or major organizational changes. But there is always opportunity to make incremental progress by optimizing lower-level processes as well.

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How Can We Help?

Schedule a free consultation to discuss your business needs.

Staffing Optimization: Re-Evaluating Labor Needs in a Post-COVID World

by Susan Dekker, VP, Integrated Insight

COVID-19 has impacted workforce economics drastically, particularly for service-based businesses. Reports from the Bureau of Labor Statistics are showing that the real hourly wage rate for leisure and hospitality was up 9% in December compared to the pre-pandemic level. This drastic increase in wage pressure puts emphasis on the importance of operational efficiency and staffing optimization measures in the industry.

Hourly Wage Change by Industry
wage rates by industry 4pm

Analytically assessing staffing levels is crucial to achieving a good customer experience while minimizing labor costs, particularly amidst heightened customer demand for post-COVID activities.

Developing workload models based on customer demand profiles allow businesses to staff and schedule locations efficiently.
These models will be most effective in operational, transaction-based roles, and include the following steps:

Let's take a look.

1. Identify customer demand.

How many customers do you expect? How does this vary by time of day, day of week, or time of year?

As with any operational business problem, always start with the customer and their needs.

Understand the volume of customers demanding the product or service at any particular time of day. For example, a restaurant may see sixty groups dining per hour during the busy lunch period, with less than ten groups mid-afternoon between meal periods.

There’s likely historical data that’s already available which can indicate demand such as historic point of sale transactions, wait times, customer entries into a venue, etc. Analyze how this demand changes based on different seasonal offerings or customer demographics.

While COVID has affected customer demand, comparing data from the past couple months with historical data from 2019 and earlier can provide useful context for the transition back to “normal.”

hospitality staff chef and server
2. Measure capacity required.

How long does it take to process each customer?

Next, calculate how many resources are needed to meet customer demand. This is accomplished by understanding the amount of time it takes to process each customer or party, known as the transaction time. Be sure to analyze both the distribution of transaction times as well as the average. Understanding what creates a long transaction could be an opportunity for process refinement.

Ideally, transaction time would be tracked systematically – for example, recording the time the first item was scanned at a POS and the time payment was completely finished to represent the start and finish of the transaction time. However, in-person observations can be used if this information is not available, and also used to validate the system-based transaction times (e.g., bagging items may not be captured in the system transaction time but does require the employee’s time).

Apply these expected transaction times to the respective customer volumes to translate this to workload. Also be sure to capture any additional non-transaction-based workload, such as restocking or time pre-opening/post-closing.

labor optimization
3. Understand business nuances.

What business rules must be met? What service levels are desired?

There are typically external or business constraints that may affect staffing levels. This may include the minimum or maximum number of hours an employee can work, requirements on certain certifications, or minimum staffing levels. These nuances will vary by line of business, so ensure you seek counsel from operational leaders.

Service levels will also inform how much capacity is needed. What is an acceptable wait time for your customers? What is the maximum wait time customers will accept? Be sure the capacity noted can accommodate natural fluctuations in demand to avoid excessive wait times.

4. Staff and schedule appropriately.

Do the scheduled labor resources match the workload need?

After understanding the customer demand, required capacity, and business nuances, create a staffing plan and schedule.

Ideally, the staffing levels throughout the day should match the forecasted calculated workload. This may require a mix of part-time and full-time shifts to meet the peaks and valleys of the customer demand.

5. Maximize operational efficiency.

What pain points in the process can you reduce or eliminate?

Take the staffing model to the next level by optimizing the process. This could include opportunities like:

- Adjusting/shifting demand: Influencing customer demand can spread customers more evenly across resources or throughout the day.
- Reducing transaction time: Increase the number of customers that can be processed by a single employee by reducing the time it takes.
- Eliminate delays: Identify times where customers or employees are waiting for a process, and brainstorm ways to reduce or eliminate these delays.
- Modify facility layouts: Often, slight changes to a facility layout can make a process more intuitive for a customer, and then can result in a lower transaction time.
- Optimize communication: Add signage or increase communication to reduce frustration and ease decision making, creating a better experience for customers.

construction planner

Ultimately, customer demand, expectations, and behavior will continue to evolve over the next year or so. As additional data becomes available and as customer volumes begin to stabilize to previous numbers, continually revisit staffing models so they reflect the most recent operation.

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How Can We Help?

Schedule a free consultation to discuss your business needs.

Restaurant Happy Hour Pricing: How to Improve Profit Margins

by Ryan Biesecker, Senior Consultant

Restaurants and bars already operate on razor-thin margins in a highly competitive industry. In order to survive, operators need to execute discounting tactics such as a happy hour thoughtfully.

Restaurants all over the world have offered discounted pricing on alcoholic beverages, and sometimes food, before dinner since at least the 1920’s. Today, a good happy hour pricing strategy will drive customers to bars and restaurants. The premise is simple: offer discounted prices at a quiet hour to attract customers. Just because the practice is common and straightforward, however, doesn’t make it universally profitable.

Here's How Restaurants and Bars Can Execute Profitable Happy Hours:

1. Identify Low Volume Days and Hours That Need Additional Demand

In order to set a happy hour, restaurant operators need to first identify when it should be offered. A common period is between 5 – 6 p.m., but that doesn’t make it right for every bar and restaurant. A good happy hour pricing strategy is timed right for the location it’s offered in. Use the following tips to determine the “right” time is for a happy hour.

How to Measure Demand

Operators should gather date, time, and revenue of transactions from their POS system. Then, organize these transactions by the day of week and time of day. Some period of time should stand out as lower demand than others: these will be the best times for the operator to discount prices. Don’t forget to measure the average checks during these periods before choosing a time to discount. If many customers are already paying full price, discounts may hurt more than help.

If a happy hour is offered during busy hours, the restaurant may overflow with demand that operations can’t handle. Additionally, a happy hour during already busy times will likely dilute the profitability of those who would have come anyways.

Determine Length of the Happy Hour

With knowledge of the restaurant’s low-volume periods, operators should decide how long to run the offer. Contrary to its namesake, a happy hour should be exactly as long as it needs to be. If the location needs volume boosted for three hours leading up to dinner, so be it. Be careful not to offer for too long, however, as extended discounts can reset price expectations.

Considerations Vary by Location

Operators should also consider competition and environment when determining happy hour timing, and whether the restaurant needs one at all.

Competition can be healthy or harmful in this instance. A taco shop and a neighboring bar can partner up to offer a happy hour at the same time: one offers discounted food and the other offers discounted drinks, attracting customers to both businesses simultaneously. On the other hand, if multiple restaurants offer a similar happy hour within a few blocks of each other, their offers will directly compete, forcing customers to choose.

Consider the location’s surrounding environment as well. Is the restaurant in a banking district where employees get off work at 5p.m. sharp? Or is it in a neighborhood where families can walk to get a bite in the afternoon? For instance, take a restaurant located near a factory where workers are covering three shifts. That unusual labor market might create demand from 11PM-Midnight when the second shift is getting off work. Restaurant owners should rely on data and local knowledge to identify these areas by location.

Finally, operators should weigh the impact of not offering a happy hour at all. If a restaurant has lines out the door at all operating hours, discounting food and drinks is more likely to harm margins than help.

2. Assess Which Food and Drink Offerings to Discount and by How Much

Menu engineering is the best method to identify happy hour menu pricing decisions. See the article by Stephen Davis, Integrated Insight’s VP of Pricing and Revenue Services, for detailed menu engineering instructions.

Menu Engineering Matrix

Once the menu items are categorized as Stars, Work Horses, Puzzles, or Dogs, choose a diverse set of beverages that are mostly Puzzles. As a reminder, Puzzles are highly profitable but with low volume. The high profitability leaves room for these alcoholic beverages to be discounted and remain profitable for the restaurant. However, the offer might not be enticing to a large enough crowd if only disparate drinks are thrown on a happy hour menu. Don’t be afraid to bolster the menu with one or two Stars (popular items with high profitability) at less of a discount.

Not all locations need to offer discounted food during a happy hour. Cheap drinks may be enough to get customers in the door. Start by only offering discounted drinks, then add appetizers and other sharables if more volume is needed or checks are too small. Be sure to assess the food items’ menu engineering category as well and follow the same practice as with beverages for a strong happy hour pricing strategy.

3. Communicate the Offer to Customers to Bring Them In

A happy hour special will dilute profit margins if a restaurant offers discounted prices without messaging. Communicate the new happy hour outside the restaurant to pull in the volume needed. This response to discounted prices will need to come from existing customers visiting frequently and at quieter hours and from attracting new customers.

There are opportunities to market the happy hour offer to in-house customers without disparaging the value of full price menu items.  Servers can message the offer when delivering the signed receipt with a warming, “come back next week for happy hour!” Additional opportunities include leveraging CRM to send follow-up texts or emails to restaurant guests with the happy hour promotion.

Outside of the restaurant, use organic online channels and word-of-mouth to attract new customers. Have employees encourage customers to bring their friends to generate word-of-mouth demand. Once launched, ask the occasional customer how they heard about the happy hour menu to better understand what works.

Wherever the communication is distributed, ensure the message is clear by sharing a takeaway detail beyond the name “happy hour.” For example, “$5 Draft Beers Every Tuesday!” states the price, product, frequency, and day of week in a memorable message that’s easy to memorize and fits on a receipt.

4. Evaluate the Happy Hour Regularly and Adjust As Needed

At the end of the day, the key to continued profitability is to ensure the happy hour pricing strategy performs as intended. Operators should set goals with several Key Performance Metrics (KPIs) and return to them on at least a monthly basis. While gross margin should be an ultimate metric for profitability, transactions/hour, revenue per hour, table turn time, total food cost, and operating expenses also play a key role.

Customers are often willing to share feedback as well, which can inform discounting decisions. Listen to their thoughts but be sure to take them with a grain of salt. For example, a regular might say there aren’t enough discounts, but return to purchase discounted items week after week. On the other hand, if customers complain their favorite item isn’t discounted for happy hour and food sales are low during that time, consider meeting them halfway.

Be prepared to pivot tactics as needed but be careful not to change too drastically or too often. Maintaining a strong value message with customers is key, and customers will be unwilling to keep up if the days, hours, and offers all change frequently.

Supporting Your New Happy Hour Strategy

Consider other operational support needed to support the new happy hour. Maintain staffing and inventory to handle higher volumes. The last thing a restaurant needs is to sell out of resources at a low price, leaving the full-paying customers with less options.

Identify the best happy hour times, choose profitable food and drinks to discount, message the offer, and measure performance. Restauranteurs can use these tools to confidently execute a happy hour strategy that works well for both them and their customers.

For more information on pricing strategy and how we partner with brands across the globe, please contact us at info@integratedinsight.com.

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How the Burden of Choice Impacts Your Customers

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by Jessica Dreiling, Sr. Consultant, Integrated Insight

Choice is simultaneously a blessing and a curse. We all want options, but often become paralyzed by the number of variables present. In a similar fashion, your customers can feel immobilized by the number of choices presented to them. This concept of “choice overload” has been understood as a cognitive impairment in which people have a difficult time making a decision when faced with many options.

During a recent shopping trip to furnish a house, my husband became paralyzed by the endless choices needed to purchase a sectional: style, shape, design, upholstery, structure, and stiffness. He spent an entire weekend researching options. Several weeks later, he still hasn’t picked one.

I am certain that if I had presented him with two couch options and said, “Pick one; which do you like better?” He would have easily chosen one and felt happy about it.

While large purchases have significant trade-offs when making choices, choice overload impacts small purchasing decisions as well.

A recent consumer report discovered that 54% of consumers experience so much frustration that they abandon e-commerce sites if they can’t choose. 42% admitted to abandoning a planned purchase altogether because there was too much choice.

If consumers cannot make a decision, it is extremely unlikely that they will make a purchase.

Simplifying Products in Travel and Tourism

It is very easy for consumers to experience choice overload when planning vacations. Whether a customer is in market filling spare time or still planning a vacation, make it easy for them to choose your experience by simplifying the presentation of your products.

In most cases, we have found it beneficial for our clients to streamline products down to a few core options.  We recommend presenting options in simple, predefined packages or bundles, in a progression of features and price. Simplifying the number of options will help to reduce the burden on the consumer and clarify the value proposition. A menu of three options is easy for customers to evaluate.

product stratification

A regional tourist destination with multiple attractions illustrates this point. This destination offers a variety of attractions, themed experiences, retail, and food and beverage. The options to purchase an experience online were overwhelming, with dozens of varieties of attraction combos and upgrades being presented together. This contributed to a perilous cart abandonment rate.

By reducing the number of products presented in the e-commerce funnel to three of the most demanded product combinations, the customer was presented with a clear “good, better, best” value proposition that facilitated decision making and improved online conversion by double digits.

Simplification Can Improve the Bottom Line for Restaurants

In the face of the COVID-19 pandemic, restaurants were forced to simplify in order to reduce costs. Simplification involved fewer moving parts and the ability to be significantly more productive. This required less labor, fewer deliveries, lower waste, and improved execution. It also eliminated broad and complex menus that were difficult for restaurants to execute profitability and consistently.

Restaurants realized that a menu does not need to be complex to be compelling. By reducing menus down to the most demanded items, patrons spent less time deciphering options, which ultimately increased table turn time, throughput, and profitability.

Fast-food chain In-N-Out Burger has been deemed the master of simplicity with a menu offering comprised of four product categories: burgers, fries, shakes and drinks. Out of the four categories, only two (burgers and fries) require any real processing at the point of purchase.

 

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Without a complex menu, the average order time per customer is reduced to around 60 seconds. Additionally, the burger chain does not have the typical variability in purchases, standardizing process flows and minimizing bottlenecks. Keeping the menu simple and streamlined has additional operational impacts, such as improved customer service, maximizing labor and machine utilization, and reduced waste.

Ultimately, trying to be all things to all people does not mean you will be more profitable.

Understanding Your Customer

So, how much choice should you provide customers? The ultimate balance any company should aim to strike is the one between consumer appeal and higher sales and revenues. Reaching that goal requires measuring what matters and taking action to improve those metrics.

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How Hoteliers Can Optimize Revenue with Post-COVID Demand

by Stephen Davis, VP of Pricing and Revenue Services

As hoteliers look to capture limited demand and maintain yields during lingering COVID-19 impacts, optimizing yield on each guest is critical. Too often hoteliers act as facilitators, ensuring a great experience but not treating amenities as potential to capture additional revenue. From bundling vacation packages during the booking process, to making it easy for guests to purchase commodities while visiting, revenue optimization strategies that stretch beyond room revenue may make the difference between profit and loss during a potentially tumultuous year. Let's look at how hoteliers can optimize revenue with post-COVID demand.

Table of Contents

1. State of the Hotel Industry

Though the recovery from COVID-19 is still ongoing, the U.S. recorded its highest monthly performance levels in May 2021 since the beginning of the pandemic, according to data from STR.

Gross operating profit for U.S. hotels reached 70% of the comparable 2019 level, according to STR‘s May 2021 monthly P&L data release. While demand, revenues and GOP continue to uptick, labor spending remained flat from the previous month at 64%.

 

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Travel volumes are expected to be nearly fully recovered to pre-pandemic levels this Independence Day (July 1–5) as more than 47.7 million Americans plan to travel.

While the improvement is encouraging, many hotels are still experiencing financial difficulty, and even more are seeing staffing issues as evidenced by the stagnant rate of labor costs.

Hoteliers are seeing an increase in demand but need to optimize RevPAR potential by utilizing revenue generation strategies to make the most of every guest, particularly as there is an opportunity to capitalize on the pent up demand expected in the summer months.

2. Revenue Generating Strategies to Make the Most of Every Guest

The potential to drive revenue does not end once a room is booked. On-property revenue opportunities should be a focus for every hotel and resort. Not only does it improve the bottom line, it also enhances the guest experience. Opportunities include bundling, upgradable amenities, and food and beverage optimization.

capture additional spend

Bundling

Packaging and bundling provide an excellent opportunity to create a holistic experience with added value. The package can be promoted with a savings message to the guest. Packaged vacations relieve travelers of decision making once their vacation starts, which can provide a more enjoyable experience as well as capture higher revenue per room night.

An example of a bundled package message may be, “book three nights and receive complimentary transportation from the airport to the hotel for just your immediate party.”  The inherent savings of not having to pay for a taxi or shared ride service is clear to the guest.

Another example may be, “book three nights and receive 25% off one dinner meal at our restaurant.” This is also a clear savings message that may result in incremental meals served in the restaurant. Tickets to local activities (for which you receive a commission) are a great addition to vacation bundles and can be customized based on consumer segment. For example, a local food and wine tour could be appealing to a couple traveling alone. A family of four with young children may spark to the local theme park or children’s museum.

Upgradable Amenities

Once traveling, guests are often willing to pay a little more for added perks such as late check out, a premium view, or higher-speed internet access. Review your own amenity offerings which could be considered beyond the standard expectation to identify potential candidates. Where possible, bundle upgradable amenities to avoid the perception of “nickel and diming,” and keep the number of upgrades reasonable. If half the rooms in a hotel are a premium view, and you’ve categorized them into several buckets, it quickly becomes overwhelming to guests.

When adding upgrade opportunities, be sure to assess the cost and profit potential for every sale. Offering guided running tours may sound like a great idea, but if it costs more to operate than the revenue it generates, it won’t do much good for the bottom line. Most amenity upgrades are reasonably priced, but even a $10 upsell purchased by 5% to 10% of booked rooms can have a significant impact on revenue and profitability, given that most upgradable amenities typically come at no cost to the hotelier.

hotel luggage concierge

For example, offer guests an “Upgrade Your Stay” package when they check in that includes higher-speed internet access, late check out, and a free non-alcoholic drink with the purchase of any snack item from the pantry, per night. The first two have little to no cost to you and the free drink could entice someone who did not have an intent to visit the pantry to actually make a purchase, or repeated purchases, resulting in some incremental revenue to offset the cost of the drink. At $10 per night, this upgrade could be an easy decision for many travelers, but make sure you can still turn the rooms with late check outs.

Food and Beverage Optimization

Almost all hotels have some form of food and beverage sales, whether a restaurant, bar, or sundries shops in lobbies. Opportunities to optimize revenue from these outlets often fall to the wayside.

To start, you can implement menu engineering principles to feature the most profitable and popular items more prominently on the menu to sell more plates that earn high contribution margins. To learn how to implement menu engineering, read our article, Menu Engineering Strategies for Restaurants to Optimize Revenue.

 

hotel server
3. Efficient Marketing Strategies to Drive Demand

With revenue down, marketing dollars need to be hyper-efficient. These strategies have proven to drive demand efficiently, increasing profit earned per guest.

Leverage Digital Channels

Digital platforms allow the flexibility for hoteliers to adapt marketing messages as consumer sentiment fluctuates in response to COVID-19. With revenue down, marketing dollars need to be hyper efficient. Targeted, direct communication to consumers can be a powerful asset for the hotelier looking to stretch their budget.

Target Past Visitors with a Return Offer

Past guests who had a good experience are already familiar with your product and more likely to repeat an experience than risk the unfamiliar. Target past visitors with a return offer as a “thank you” for past business with messages that make them feel appreciated and welcome.

Communicate Safety Messages

When selecting a hotel, enhanced cleaning and hygiene practices are still a high priority according to the AHLA State of the Hotel Industry 2021 Report. Guests also feel more comfortable when properties communicate these enhanced cleaning practices. Nearly seven out of ten travelers report wanting to hear directly from hotels what measures properties are taking to ensure safety.

4. Sales Channel Strategies for Sustainable Growth

Third party sales channels can be a boon for business, but they also pose risks. With COVID-19 impacting demand, now is the time to assess your channel strategy and whether it is providing a net benefit.

Over time, third party agreements have the tendency to get unruly. Agreements are made year to year and often new partners are added, but many hoteliers do not perform the due diligence to optimize their distribution strategy. Below are some steps to take to ensure your strategy is working for you and not against you.

Channel strategies

Realign Commission Structure

Tie your commission structure to volume requirements by providing the most lucrative commissions to the channels that drive the highest volume.

Review Sales Volumes

Review volumes to ensure partners are performing according to their agreement. If you don’t already, create a report for third-party sales and the respective commissions to analyze if partners are living up to their end of the agreement. For channels with low volume and high commissions, consider ending those agreements.

Explore New Channels

New travel aggregators are being created daily and there are a multitude of companies regularly looking to provide value-added perks to employees such as standing discounts. Both of these options are worth exploring further and regularly looking for new players that could expand your reach.

Sales channels are often overlooked for optimizing revenues. Taking the time to assess your third party strategy could reveal significant opportunity to increase yields and drive incremental demand.

Get Started with Revenue Optimization

Unfortunately, the lingering impact of COVID-19 could continue to make profitability a challenge. Hoteliers will need every tool in their revenue management toolbox to be successful. While there may not be a silver bullet to demand generation, optimizing product, pricing, and marketing will drive revenue and set you up for success.

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Basic Guide to Process Improvement: A Structured Approach to Optimizing Your Operation

The most successful companies are those that can continuously adapt to meet the changing needs of the consumer and their business. Optimizing business processes can be overwhelming, and it can be difficult to know where and how to start. However, problematic and stagnant processes ultimately cost companies money.

Inefficient or ineffective processes result in many different issues: excess turnover because of employee frustration; increased production costs as a result of defects and waste; lost customers due to long waits, miscommunication, or poor quality.

Likewise, optimized processes have many benefits: higher employee engagement and productivity; a streamlined operation with lower inventory costs, fewer required resources, and minimal errors; improved customer satisfaction, transforming loyal customers into brand advocates.

We can look to lean manufacturing and Six Sigma for a wide range of tools, techniques, and methodologies to improve business processes. Two of the most well-known frameworks for process improvement projects are PDCA (plan – do – check – act) and DMAIC (define – measure – analyze – improve – control). These each take an analytical, structured approach to process improvement, with slight differences between the two methods.

Following is a guide to process improvement, leveraging the key steps within PDCA and DMAIC, as well as other methodologies. The key takeaway is that improving your business is a continuous process, and the more defined the process, the better.

 

Basic Guide to Process Improvement
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    guide to process improvement
    1. Observe

    Decide which process you want to improve. Candidates with the most opportunity will typically have long lines or waits for customers, low profit margins, or a high number of customer or employee complaints. After selecting the process, the first step is to observe the operation in person. Create a process map or value stream map to document the process, including any possible variations. This ensures you fully understand the steps of the procedure and the required resources and people, as well as provides a document to ensure all team members are on the same page for which process is under review.

    2. Aim and Define

    Next, develop a SMART aim statement to define the scope of the project and articulate the mission. SMART stands for specific, measurable, attainable, relevant, and time-based. An example of a SMART aim statement could be “Reduce processing time for XYZ by 25 seconds by the end of Q3” or “Increase hourly throughput during peak hours by 10% at Restaurant ABC by May 31st .”

    3. Plan and Analyze

    After clearly defining the business goal of the project, develop a list of possible causes for issues and challenges. This list should be formed through a combination of direct observation of the process, interviews with multiple front-line operators and available data to determine the relative impact of each. Host a brainstorming session with key stakeholders and select front-line workers to create a plan of modifications and solutions, focusing on changes that are the most feasible with the highest impact. Including front-line employees in the planning process will help with change management upon implementation.

    4. Test and Check

    Pilot the selected changes in controlled, small-scale scenarios to identify problems and work out the details. Simulation can also be used to test changes in a virtual environment, particularly if pilots are infeasible or cost prohibitive. Gather results from the piloted change to analyze the effectiveness of the tested solution(s). Make any tweaks based on feedback from front-line operators. If needed, re-test the solution. Compare the expected gains to the aim statement to ensure solutions are on track.

    5. Improve

    Roll out widespread implementation of the optimized solutions. Depending on the scope of the project, a phased roll out may be the least disruptive and allow targeted focus during each phase of the implementation.

    6. Control

    Process modifications are only useful if they are maintained. Develop controls to ensure any changes stick. This includes documenting the new procedures, updating training materials and standard operating procedures, and providing refresher training as needed. Continue measuring and reporting on the impact of the modification to keep it top-of-mind.

    In Conclusion

    Processes can become out-of-date quickly, so it is prudent to regularly revisit, reanalyze, and improve procedures. This allows for continuous improvement of the operation, enabling an efficient operation for the long term.

    Improving business processes can be a formidable challenge. Using a structured and analytical framework can provide a repeatable and scalable approach to solving these issues.

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    Foundational Approaches to Achieve Operational Efficiency

    by Susan Dekker, Director, Integrated Insight

    Operational processes can become out-of-date as customer expectations and technology continue to evolve. This inefficiency results in excess costs, unnecessary frustration for both customers and employees, and lower quality products or services. While operating efficiently is an obvious goal, front-line employees are often too busy fighting fires to dedicate time and resources to improving or are caught in a “this is how we’ve always done it” mentality.

    The risks of operating inefficiently are too great to ignore:

    • Increased transaction times, longer waits for service: The longer it takes to process a customer, the longer all customers must wait.
    • Diminished quality: Processes prone to errors or rework ultimately result in an erosion of product quality.
    • Poor customer experience: Waiting longer for an inferior product usually results in lower customer satisfaction.
    • Poor employee experience: Inefficient processes are frustrating to all involved, employees included, as they strive to do their best.
    • Increased costs: Errors and delays cost real money, both in terms of wasted product and additional holding costs.
    • Decreased sales: The universality of online product reviews and social media means one poor customer experience can deter multiple future customers.

    Identifying potential improvements can be done through structured observations and data analysis. Observe the process in person with key stakeholders to be sure they can visualize opportunities. Analyze historical system data to understand the impact of the issue. See “How to Conduct an Efficiency Summit” for more details.

    Often companies focus on “big picture” initiatives, resulting in company-wide standardization or major organizational changes. But there is always opportunity to make incremental progress by optimizing lower-level processes as well. Types of changes, both big and small, could include:

    1. Organizational: Align roles in the organization that can result in a streamlined process. For example, a centralized scheduling group may be more efficient than a dedicated scheduler within each business unit.

    2. Transfer of responsibility/information: Often times the ball can get dropped as product fulfillment or customer service is handed off from one department to another. Clarify responsibilities and standardize communication to prevent issues.

    3. Technology: Ever-changing technology may mean some processes are now obsolete and can be eliminated. Or, there may be newly-available software that can automate processes currently done manually.

    4. Resources: Quantify the amount of both labor and physical resources needed to ensure there is sufficient capacity available to meet customer demand, at your targeted service level.

    5. Facility: Optimizing customer or product flow may require adjustment to facilities. Quantify the cost/benefit of such changes to see if warranted.

    6. Layout: Even minor layout changes can make big differences. Do employees have to walk 3 steps to pick up materials to finish a transaction? Is there an opportunity to move those supplies to within reach of the register?

    7. Communication: Identify what aspects are currently confusing to customers, and improve communication through signage, mobile alerts, and how employees are trained to explain products and services.

    8. Production/Inventory: Evaluate production levels to make sure the right amount of inventory is available at the right time.

    Creating lasting change takes work, so be sure to set your company up for success from the start. Ensure front-line operators have buy-in from the beginning by including a representative on the project team. Pilot and test any changes before widespread implementation to work out all the kinks and avoid negative perceptions from the consumer or employee. Retrain all employees on the new process – and make sure they know WHY the change was made, not just WHAT the change is. Update any training documents or SOPs to reflect the new method so employees have the right information. And give them permission to STOP doing what is no longer necessary.

    Achieving operational excellence doesn’t just happen from a one-time analysis. Regular maintenance is needed to avoid stagnation. Regularly revisit and observe processes and create forums where front-line employees can share their improvement ideas. Recognize and reward innovative ideas, as well as the employees who are advocates of changes. Measure and report out on progress, both so employees can see the impact of the change and also hold the right personnel accountable to the new standards.

    proven approaches to achieve operational efficiency

    Operating efficiently is not easy – it requires active work and input from all organizational levels. But the results are worth it: improved customer experience, minimized costs, and increased employee morale.

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