Coming out of a crisis and surviving a smaller demand might be tempting to justify lowering your prices to boost revenue.
It’s easy to predict that your profit margins will suffer, but will it increase the revenue? Actually, it depends.
Competition Analysis
The first thing you need to do is research your competition to see what they are doing and how you position against them. Metasearches are a great place to start, since they act as a benchmark for hundreds of brands on a single search, saving you a lot of time of actually going into each of the websites and running a search.
You should start the research with your top ten or twenty routes, focusing on the changes that will bring the most impact short term. When you need to scale to more routes and a bigger sample of pricing data, consider using some automation tool to avoid spending hours doing too much manual work.
Now, let’s see when you should and shouldn’t lower your prices.
Growth Opportunities
Analyze each itinerary separately and calculate the price difference between your brand and the cheapest one. If it’s less than 0.1% then it’s an amazing chance to lower your price, because a small reduction on the profit margins will translate into a huge boost in traffic. First option on metasearches can get as much as 65% of the click share, even if the other prices are pretty much the same. This varies depending on the meta user experience of course, but it is always a great bet to begin with.
Itinerary Positioning
There are probably some flight itineraries you will already be the best price, so what should you do there? We talked about boosting profit margins on a previous story, but today is all about revenue so let’s dig into our options for that.
Compare your price with the cheapest price on the itinerary right above yours. Since you are in control of your itinerary price, it’s also in your best interest to make that whole itinerary move up on the results page. The majority of clicks go to the top three results on the first page, so aim for any of those spots.
Missing Content
Well you might think this is not really lowering prices, but since it’s also related to boosting revenue, why not mention it?
When doing the research you will see that for some specific routes and dates you are not appearing anywhere on the first page of results. Sometimes not even on any page number.
This could be caused by a number of different reasons:
- The metasearch is blocking you on some searches where they detected a low eCPC that you are not selling and they never notify this of course, so you need to complain and ask them to stop.
- Technical issues on your API resulting in timeouts or errors that the meta will ignore and just avoid showing you on the results page.
- Integration issues where some specific parameters might be throwing off your API response with invalid data.
Final Thoughts
We covered the basic tactics to understand which cases lowering prices is really beneficial. There are more advanced variables you can take into consideration too, but we suggest postponing those until you’ve used all the opportunities covered here.
And remember, lowering prices is not always the answer.
