5 Steps to Increase Profits with ‘Yield Management’
By Mark Lawrence
The Internet is rapidly changing the way you drive. The same technology that makes it easier for drivers to park can also help you maximize profits in your facilities with dynamic pricing afforded by so-called yield management technology.
Offered through an online reservation platform, yield management can turn your facility into a “smart device” that is constantly feeding information about capacity and demand to help you adjust pricing in order to achieve your optimal capacity.
If you are considering using yield management techniques, I would like to share a quick and simple overview of how to get started in five easy steps:
Understand your facility’s characteristics: When getting started with yield management, you need to have a really good sense of what is happening at your facility in terms of occupancy. You might have very clear historical data based off ticket count, but you might not. No worries. Start this evaluation process by monitoring what’s happening at your facility in order to determine which days and times you are full. Do you have an “early bird” crowd? Are you packed in the evening? Do you fill up around events? Or weekends? Once you have a clear view of your facility, you can get started with yield management.
Determine your ideal occupancy: Not everyone has the same expectations or needs when it comes to occupancy. It depends on your facility’s unique characteristics and what you learned during the evaluation phase about when it’s most and least full. You also need to take into account things such as if your facility is self-park, do you want to leave room for drive-ups? Or do you prefer to be as close to full as possible? Once you’ve figured this out, yield management can help you set the right price to achieve your goals.
Get started with a mobile app: Rather than designing your own yield management platform, you can take advantage of existing technology that enables you to easily sell your excess inventory by pricing empty spots based on demand. Remember that a spot sold at a lower rate is better than a spot left unsold, because, ultimately, parking is a perishable good. Mobile apps operating with yield management technology make price changes instantaneously. Rate sheets will become a thing of the past, and dynamic screens will be the future.
Let “dynamic pricing” do the work: By focusing on historical and live data from web and mobile users, online reservation platforms can tell you the optimal price to attract the most customers during certain times of day, depending on occupancy. It also can tell you at what times you have peak occupancy and what would happen to your occupancy rate if you were to raise or lower your prices by a dollar. The key is to make changes fast with the data at hand in order to price parking spots better and reach your ideal occupancy.
Deliver customer value: On the road to achieving ideal occupancy, you need to consider the value that the customer is getting out of the transaction. One garage I worked with had both a drive-up and online rate at $15. People were not very excited about their experience, because there was no perceived benefit to using the mobile app. So we raised the drive-up rate to $18 and the online rate to $16, and everyone was happy. Sales went up because customers got a discount by purchasing online, even though the price was higher than it was originally. Before, the only thing you could do was set a price and hope they drive in.
Focus on overall revenue, not per-car revenue: It’s easy for operators to become highly focused on the number of cars moving through their facilities. Instead, focus on the amount of time cars spend parked in your facility. Worry less about whether you make $8 or $6 per transaction, and consider price-times-volume to make sure you maximize overall revenue.
Yield management technology can be a very powerful tool when used correctly. It allows you to be more responsive to current
market conditions and raise or lower your prices accordingly to attract more drivers.
An added benefit is that such technology also exposes you to a completely different group of drivers who would not have previously found or used your facility. Just remember to take the process step-by-step, and over time, you will see the benefits that yield management can provide.
Mark Lawrence is the Co-Founder and CEO of SpotHero, an on-demand parking app and website. He can be reached at firstname.lastname@example.org