Universal adopts demand pricing for Harry Potter

LOS ANGELES – Universal Studios Hollywood is putting a price tag on the demand for fun.

The Los Angeles-area theme park is anticipating huge crowds for the April 7 opening of the Wizarding World of Harry Potter. If you want to be one of the first to experience it, be prepared to pay more than if you want to go, say, on a slow Tuesday in September.

So-called demand, or variable, pricing is nothing new to airlines and hotels. They have long charged higher prices on holidays and during popular seasons. Uber and Lyft charge higher rates during hours when the car-hailing services are in most demand.

Universal is the first major U.S. theme park to embrace demand pricing, though experts say consumers should expect more to follow.

Walt Disney Resorts put out feelers to annual pass holders last year, asking their opinion of a three-tiered pricing system aimed at charging more during Christmas, spring break and summer.

“It’s sort of a no-brainer,” said Martin Lewison, a theme park expert and business management professor at Farmingdale State College in New York. “As the parks see the bigger companies doing it more and more, it will become more accepted.”

Under the pricing policy launched Tuesday by Universal Studios, tickets bought at the gate remain $95. But visitors who book tickets online for low-demand days – such as a weekday in March before Harry Potter opens – can save up to $15.

During weekends and peak demand days during spring break or summer, parkgoers save only $5 by booking online.

Universal wants people to plan ahead, which will help it manage its operations. Parkgoers can lock in prices by buying tickets online for dates through the end of September.

People who procrastinate might see online prices fluctuate depending on last-minute demand.

Buying online comes with another incentive – entry into the new Harry Potter area an hour before the rest of the park opens.

The new Harry Potter world will feature two new rides, one restaurant, a food cart and eight shops based on the wildly popular books and films about the boy wizard.

Harry Potter has already been wildly successful at Universal’s other parks. After a Harry Potter ride made its U.S. theme park debut at Universal’s Islands of Adventure in Orlando, Florida, attendance jumped nearly 30 percent in 2011, according to estimates by Aecom, a Los Angeles engineering firm.

Additional Harry Potter attractions were added later at nearby Universal Studios Florida in 2014, boosting revenue by double digits for Universal Studios’ parent company, Comcast Corp.

Experts say variable pricing can help spread out attendance spikes and ease frustration that is sure to rise when a new attraction opens, producing long lines and shoulder-to-shoulder crowds.

“Demand-based pricing not only helps maximize ticket revenues, but also provides a tool to shift price-conscious consumers to less-busy days,” said Michael Erstad, senior consumer analyst at New York-based ITG Investment Research. “Spreading visitations throughout the week may help improve the overall customer experience at the park.”

So far, Universal isn’t increasing its maximum price, although park officials didn’t rule out such a move in the future.

Disneyland Paris already employs a form of variable pricing that raises rates on weekends and high-demand weekdays. For example, a single daily adult ticket to Disneyland Park and Walt Disney Studios Park valid throughout the year costs $101, while a ticket for lower-demand dates costs $85.

But demand pricing has yet to catch on on a permanent basis throughout the theme park industry partly because visitors get frustrated when too many variables are added to the ticket-buying process, Lewison said.

“It’s a conservative industry, overall,” he said.

Discovery Cove, an Orlando boutique park where people must make reservations to swim and interact with dolphins, has for several years offered lower prices for low-demand days. Discovery Cove, owned by SeaWorld Entertainment, is an all-inclusive resort-type park with a limit of about 1,300 visitors a day.

Other parks have offered lower prices on off-demand days on a limited basis for special events such as Halloween Horror Nights at Universal Studios Hollywood and Mickey’s Very Merry Christmas Party at Walt Disney World. SeaWorld San Diego offered discounts for weekday tickets in summer 2014.

Walt Disney Co. may be considering demand pricing to spread out the crowds that are certain to arrive when Disneyland in Anaheim opens its highly anticipated “Star Wars” land, industry experts say. Construction of the 14-acre area began last month, but a completion date has yet to be announced.

A Florida version of the Star Wars area also will be built at Disney’s Hollywood Studios, which is part of Walt Disney World Resort in Orlando.

Disneyland is already wrestling with a crowding problem and growing frustration among guests. The park has closed its gates temporarily over the last few years on days when attendance exceeded the park’s capacity, such as Christmas Day.

Attendance has been on the rise at Universal Studios Hollywood following the opening of several new attractions, including Transformers: The Ride 3D in 2012, Despicable Me Minion Mayhem in 2014 and Fast and Furious-Supercharged in 2015.

But the park has yet to close its gates because of overcrowding. The Harry Potter area could test those limits, experts said.





Revenue, Pricing, Margin Strategy and The Role Of The Board – a checklist for your next Board Meeting

Recent crisis at Billabong and Dick Smith, Fantastic Furniture, PaperlinX, Hills Industries, Orica, Salmat, Woolworths, Slater and Gordon have all seen the CEO exited from the business with the exception of Slater & Gordon whose share price has fallen from a high of around $7.85 to $0.59cents representing a 92% loss in share value in less than 12 months.

All these companies have had in the past been successful. Their fall has as much to do with the culture and mindset within the business as changing and disrupted business models eroded their pricing power or final demand for their products or services.

As an insider working with a number of these companies over the years,  there is one common denominator that I have experienced first-hand and that is the CEO and Board’s lack of focus on revenue, pricing and margin management.

All of these companies have had an attempt to fix margins through various methods – costs down, blanket price rises and 1000’s email discussions supported by 100s of PowerPoint pack describing the exact angle of the ship’s descent into the abyss.

In contrast, the CEOs who take an active interest in the nature of revenue, pricing and margin management have seen their businesses get focused on the right things at the right time and weather the storm to hold revenue and margins or,at least be only down on budget by smaller more recoverable percentages.

I like to look at precedent and use everyday observations to identify direction and a course of action that has the best probability of success. In studying companies like General Electric, Caterpillar, Dupont and Coca-Cola, we see many examples of pricing strategy and performance being elevated to the board room.
Jeff Immelt the CEO of GE, outlines in one of his first shareholder letters that “his morning begins with a review of working capital or pricing”. Think about that for one moment. This is the CEO who succeeded Jack Welch, making pricing a priority. That is a best practice benchmark.
So in light of the turmoil faced by ASX listed companies and my observations firsthand of what does not appear to work

I would like to provide a checklist of questions for the Board and CEO to walk through at their next meeting to identify risk, opportunities and develop the right strategy.

This checklist can be run as a daylong workshop or series of shorter workshops to allow time for evaluation and review.

Area of Focus & Key questions

Board and CEO working together

1. Have we given the CEO the support and focus to drive revenue, pricing and margin?
2. Do we as a Board give revenue, pricing and margin management adequate airtime at Board meetings?
3. As a board do we have enough commercial literacy in pricing to ask the right questions and give effective feedback?
• Performance and KPIs 4. Do we have the right margin metrics and KPIs to identify and diagnose potential sources of revenue and margin leakage?
5. What are the leading and lagging indicators or margin erosion in the business?

Vision, Strategy and Alignment

6. Does the CEO have the clarity and vision around the right revenue model pricing strategy to deliver on the EBIT targets required?
7. Do we have a published pricing strategy that is understood by all sales, marketing finance and operation staff?
8. Is our pricing strategy aligned to our value propositions that serve our ideal target markets?
9. Are the executive team aligned to the pricing strategy?

Risk Management

Policies and practices
10. What is the potential risk to revenues and margins?
11. How do we know if our list price, discounts and rebates are correctly structured to drive incremental gross margin earnings?
12. Do we have pricing policy in place that reflects our pricing strategy and is commercially practical?


13. Who provides the checks and oversights to rebate and discounts and what controls are in place?
14. Do we have a pricing and margin governance program in place?
15. Are the audits we are running really thorough or are we in fact having a lot of boxes ticked without the serious due diligence needed?

Operating Framework

16. Have we provided out teams with the right training and education to manage pricing effectively?
17. What is the commercial literacy in the organisation?
18. Are our pricing systems effective in providing us with accurate readings on revenue, pricing and margin?
19. Can we undertake analytics to identify margin risks and opportunities?
Communication and Relationship Management
20. Do we communicate the pricing strategy and direction to the whole of the business?
21. Do we have a change management plan in place to help the salesforce transition from discounting to close the sale to more structured pricing tactics & programs aligned to the overall pricing strategy?

Crisis Management

22. Do we have a plan to manage the loss of a major customer(s)?
23. Will our pricing strategy or policy change should we have to announce a profit downgrade?
24. Do we have a pricing mastermind in place to help get the business back on track?

This list will provide a starting point to carry out some fairly tough and robust discussions. If it is undertaken correctly there will be some controversy. There will be a debate.  This is good. Competition and alternative viewpoints almost always generate better outcomes.

Here is one other little secret I have found over the years. People work well together when they all can feel connected to a bigger picture, a greater power of good or a higher purpose.
When that greater power of good or higher purpose is missing, company culture reverts to the cult of personality led management. Inevitably, this cult of personality is often based on fear and peer conformity and more often than not, a touch of arrogance. This the culture that pervaded Woolworths for many years.
Much has already been written about this elsewhere so I will only speak on what I personally witnessed and that was all of the above and at times criminality.

One specific example was a situation whereby the National Account Manager of a key grocery supplier  to Woolworths was found to have provided Woolworths with an additional unauthorised $2.0M in promotional discounts to help his Woolworths buyer meet margin budgets.His buyer just happened to also be the Best Man at his wedding some years before.

This is a clear breach of the corporate code of conduct whereby the sales force entrusted to negotiate on behalf of the company cannot, and should not carry on deep personal friendships that will clearly create a conflict of interest or at best, clouded judgement.
The Managing Director of the FMCG supplier knew of this friendship but chose to overlook this liability. It eventually put his job and reputation at risk when the unauthorised discounting was discovered by a vigilant commercial pricing team. The case went before court and the offending account manager sentenced to 136 hours of community service.

In this case, the Board did not have in place an oversight  and independent sign off process. The convicted account manager believed that they had the unfettered right to make pricing decisions on their own.  This type of culture present a major risk to companies and should be a primary concern of the board to work with the CEO to eliminate a sense of entitlement to make pricing and commercial decisions without reference or deep oversight and sign-off.

Today as we speak, there are 1000s of Sales Directors and Account reps who can offer discounts, rebates and trading terms to market and then sign off these offers as payments to customers in cash or kind. This a clear breach of Sarbanes-Oxley separation of duties. It is something every board should check as soon as possible.

Often I receive stories like this one from colleagues. They need to be told.

We are living in an age where the need to be candid, serve a higher purpose and be connected to what is right has never been more important.
This isn’t a call to sit around singing Kumbaya, or trying David Brent style, to be disingenuously sincere. It is a call for Australian business leaders and management to take on telling the truth and make candour a mark of real leadership.

For the companies listed earlier, this is the one element missing from the management culture.  This candour is crucial if the business is serious about managing revenue, pricing and margins.





Debunking a Market Research Myth

What customers say they will do, and what they actually do, can be two completely different things

As all businesses know, when it comes to customers, what they say they will do (in market research), and what they actually do, are two completely different things. All too often, I see revenue forecasts or sales projections that fall into this trap.

The day after Apple launched the iPad Mini,  I stumbled across some research[1] (obviously completed in record time!) that suggested that 14% of respondents ‘would definitely buy’ the product, and 32% said they ‘probably would’. Add the two numbers together and you’ve got 46% take-up. Fantastic!

The Urban and Hauser scale tells us that, of the 14% who said they would definitely buy, you can be reasonably sure that 90% of them will actually buy, while 40% of those who said they ‘probably would’ will actually buy, Do the sums, and your take-up forecast becomes 25.4%.

Later that week, I was discussing with a Pricing Manager, the importance of having a decoy product. When asked if we could model the impact of a decoy product, I remembered some forecasts made in an experiment conducted by the Behavioural Economist, Dan Ariely.

In his talk at the London School of Economics in March 2008 (which is also described in his book Predictably Irrational), Professor Ariely described an experiment where 16% of participants would take up a digital-only subscription to The Economist at $US59, none would take up a print only subscription (the decoy) priced at $US125, but 84% would take up a print and digital subscription at $US125.

When the experiment was repeated without the decoy, the 16% became 68% and the 84% became 32%. A quick calculation, assuming 1mill subscribers at the above-mentioned prices, reveals that revenue would be nearly 43% higher with the decoy product than without.

Following a quick search on Google, I discovered that The Economist (which doesn’t appear to report subscriber numbers) had digital-only circulation of 100,000[2], out of a total circulation of 1,574,803. This implies a digital-only circulation of 6.35%, significantly lower than Professor Ariely’s number. Could this be another example of market research not catering for the difference between what customers say they will do, and what they actually do?

In a previous post Are you Pricing Like Dennis Denuto?” , I talked about why scenario analysis was one of the pricing traps companies often fell into (liking a set of number from one scenario without reality-checking the assumptions the scenario is built upon). You no longer have an excuse for falling into this trap with revenue or sales volume forecasts.




Need Better Price Volume Mix Analysis? It’s Easier Than You Think.

Most Price Volume Mix analyses are “top-down” analyses.  They focus on certain buckets, typically price, cost, and volume, and then assign everything else to a plug labeled “mix.” While this approach can supply a quick-and-dirty view of the big picture, it usually raises more questions than it answers. As soon as you share results, someone wants to identify the driver of those results. The top-down approach doesn’t provide answers to that, because you cannot drill down into a plug.  You return to your desk and run a deeper set of cuts just to uncover yet another set of questions.

In contrast, “bottom-up” Price Volume Mix analysis calculates the exact impact of price, cost, and volume at the specific levels of unique customer, product and even transaction.  By building calculations from the ground up — with no plugs — a bottom-up approach instantly identifies which areas of business are driving each area of change. This empowers you to find actionable insights for margin improvement at any level in your business.  A top-down approach raises more questions and requires more analysis; a bottom-up approach answers questions and allows focus on taking action.

price volume mix analysis

Five Situations Requiring Bottom-Up Price Volume Mix Analysis

1. Measuring the Success of Price Increases

Eliminating the effects of customer mix shift is critical to understanding the effect of price increases. Top-down Price Volume Mix analysis, which simply compares the change in overall average selling price by product, can be misleading. Customer mix shift can drive average selling price down even if you successfully increased prices for every individual customer (and vice versa).

In contrast, bottom-up Price Volume Mix analysis isolates the impact of price changes at the customer level, providing true visibility into the success of your price increase implementation.

Even if a price increase did achieve its overall goal, it likely did not succeed with every customer and product. By providing insight into price changes for individual customers and products, or any combination thereof, a bottom-up approach to Price Volume Mix allows you to measure success at any level of granularity to identify individual pockets of opportunity for margin improvement.

2. Identifying Opportunities to Pass Cost Changes on to Customers

Many businesses compare price change to cost change to determine how effectively they’ve passed cost increases through to customers. Top-down Price Volume Mix analysis measures overall average selling price, which is a product of both customer by customer price change and customer mix shift. It may appear as though you’ve passed costs through effectively, when in reality, you have merely benefited from positive customer mix shift.

Bottom-up analysis provides a true measure of price change and is therefore a better yardstick for gauging how effectively you’ve passed through cost changes. It also enables you to measure price changes customer by customer and product by product to identify specific areas where cost changes haven’t been passed through and take corrective action.

3. Measuring the Impact of Initiatives Across a Business

Businesses undertake many initiatives in any given year. This often requires the development of different methodologies to measure different initiatives, which can lead to time-consuming debates around methodology and often results in double-counting impact across multiple initiatives. The inflexible nature of top-down Price Volume Mix analysis means it does little to resolve this problem.

Bottom-up Price Volume Mix analysis, on the other hand, serves as a consistent basis for measurement. By isolating the effect of each driver of margin change at the level of individual customers and product, it provides a congruous framework for measuring the impact of almost any initiative across the business. Whether the goal is to increase prices in a particular region, reduce costs on a specific set of products, or increase marketing to a targeted segment, bottom-up Price Volume Mix analysis isolates and measures the exact impact of initiatives.

4. Understanding Drivers of Product and Customer Mix Shift

A significant drawback to top-down Price Volume Mix analysis is that it “plugs” customer and/or product mix by calculating the buckets such as price and volume and lumping the remainder into an amorphous bucket of “mix.” This makes it difficult, if not impossible, to understand exactly which customers and products are driving mix shift and the direct these effects take.

Bottom-up Price Volume Mix, however, calculates customer and product mix for every individual customer and SKU, empowering you to identify exactly which customers and products are driving results and take action accordingly. Moreover, while a top-down approach simply provides visibility into overall performance, a bottom-up approach provides a means to identify individual pockets of opportunity trending in a different direction than overall mix shift.

5. Measuring Impact of Innovation on the Bottom Line

Adding new products and culling others is often a significant impact driver of margin performance. Yet, by using a plug for mix shift, top-down Price Volume Mix analysis provides no means of isolating the mix shift impact of new and discontinued products. Bottom-up analysis, however, allows you to measure the exact impact of such actions as well as the impact of new or lost customers, market segments, or any other aspect of your business.

The Bottom Line

By building calculations from the ground up — with no plugs — a bottom-up approach instantly identifies which areas of business are driving each area of change. This empowers you to find actionable insights for margin improvement at any level in your business, like it has for our customers on the KiniMetrix platform. For one industry leading customer in the distribution business, measuring the impact of specific initiatives, pinpointing drivers of product/customer mix, and understanding impact of new/discontinued products on mix shift has enabled this company to closely manage mix to optimize margins—and ultimately their bottom line—in what is traditionally a thin-margin industry.


Need Better Price Volume Mix Analysis? It’s Easier Than You Think.


What’s Your Pricing Question?

The most important number in any business is the number on its price tag. But pricing is more than just a number. Much, much more.

When evaluating where companies sit on my “Roadmap to Best in Class Pricing”, I assess pricing excellence along eleven critically important dimensions, none of which have anything to do with the numbers on a price tag.

Those dimensions include:

a) executive commitment

b) people

c) strategy

d) processes

e) product offerings

f) communications

g) customer segmentation

h) data, knowledge and information

i) tools

j) discounting and

k) controls.

With so much to consider beyond just the price point, is it hardly surprising that there is no such thing as the perfect pricing organization, never mind a league table of the companies most admired for their pricing?

Since re-launching PricingProphets.com almost three months ago, the one question we have not been asked is “what price (numbers) should we put on our price tag?”

But we have helped take the stress out of, and provide clarity around, pricing, for numerous companies as they commence their journey to pricing optimization and excellence. We’ve done that by answering the following questions for them…

  • What is the best pricing for our branding & positioning in the market?
  • How do I design my pricing page to optimise perceptions of value?
  • How do I design my menu to optimise perceptions of value?
  • Is our pricing model appropriate for our market?
  • How can we tell if our introductory offer is appropriate?
  • How can we tell if our introductory offer devalues our product?
  • We’re proposing 3 different pricing options. Is this sufficient?
  • Should we use price incentives or value-adding offers?
  • How often can we realistically adjust our prices?
  • What is the best way to determine if our price position is cheap?
  • What is the best way to determine if our price position is expensive?
  • What is the best way to present our pricing?
  • What is the best way to leverage our pricing for media attention?
  • We’re getting beaten on price: what strategies can we develop to overcome this?
  • We need to raise prices: what are your tips on doing this?
  • How do I get non-paying customers to start paying?
  • How do I create a value-based pricing model?
  • How do I simplify my entire pricing model?

Your products and services are not the same as your competitors. Neither are your costs, your channels to markets or your customers.

Your pricing questions may also be different to those mentioned above. But whatever the question, we look forward to answering them for you in 2016.





How to Win Price Negotiations on Value

How often do you experience a situation similar to the one below?You have been working a prime sales prospect for the past six months. Your product is the ideal solution, you have done a great job of selling the value and you have carefully calculated a value-based price point for this prospect. But, despite your very best efforts at winning the deal, the buyer is asking for a lower price.



What do you do next?

Trade Value

Let’s step back for a moment and look at the physics of selling and buying. Think of the economic relationship between seller and buyer as a balance between benefits and price. On one side are the benefits delivered by your solution. On the other side is the price the customer must pay to realize these benefits.

The goal of any win-win sales situation is to maintain a fair and even balance between price and benefits. If benefits are increased, they will outweigh the price and disrupt the balance. Likewise, an increase in price will outweigh the benefits and disrupt the balance.

When a buyer asks for a lower price, he or she is effectively disrupting the balance in value. A lower price essentially tilts the value in favor of the buyer.

In order to maintain balance in the value equation, when the buyer asks for a lower price, we can respond with a resounding “Yes!” …with a caveat. We must remove something from the benefit side of the equation to maintain the balance in value. Essentially, we are reducing the benefits of the product for the lower price.

Look for product features, services, delivery schedules, warranties, payment terms or lower-priced product alternatives as sources for reducing value. Remove or reduce these value features to decrease the delivered benefits. From a negotiation standpoint, the trade for value does not necessarily need to be completely equitable. You just need to communicate to the buyer that there is a “price” to be paid for a lower price. Lower prices are not free.

Buyers often expect lowered prices from suppliers because the seller has historically trained the buyer to agree to lower prices without concessions. Your job is to train the buyer to expect a trade in the benefits delivered in return for a lower price.

Smart salespeople will be prepared for this type of value-trading discussion. Identify items in your proposal that you can remove if the buyer pushes back on price. Be prepared to tell the buyer what items can be removed from the proposal at the moment the buyer asks for a discounted price.

We find, in many cases, that the buyer is not willing to sacrifice any component of the proposal and agrees to the full price.

Empowering your sales team with this negotiation strategy helps you strengthen the perceived value of your brand as you ensure healthier margins. Once buyer and seller agree to place value over price, you will discover how easy it is to hold the line on price and build more profitable business relationships.





Congestion pricing!

Cities need the power to use road tolls and congestion taxes, group says

It is long past time that Canada’s congested cities began putting a price on some of their most precious real estate, says a new report from Canada’s Ecofiscal Commission.

We’re not talking about toney residential enclaves, gleaming office towers, retail districts, industrial parks or condominium complexes, but rather the thoroughfares that join them.

“We’ve got a very scarce commodity called road space during peak times, and it’s unpriced,” Chris Ragan, the McGill University economics professor who heads the private ecofiscal think tank, said in an interview.

“We don’t price road access, and the cardinal rule in economics is if you have an unpriced resource it gets over-used.”

Traffic congestion is the subject of the latest commission report, “We Can’t Get There From Here: Why Pricing Traffic Congestion is Critical to Beating It.”

traffic congestion gridlock rush hour

Canada’s big cities are choked with a traffic problem that isn’t going to fix itself, Canada’s Ecofiscal Commission says (Tomohiro Ohsumi/Bloomberg)

It’s the second major study from the privately funded, non-partisan group of 10 economists backed by a cross-partisan advisory board that includes the likes of Reform party founder Preston Manning, former Liberal prime minister Paul Martin, Suncor CEO Steve Williams and B.C.’s former NDP premier Mike Harcourt.

With less than a month to go until a key international climate change conference, Canadians may be bracing for an economic hit of some sort as the new Liberal government has promised a more aggressive international stance. As Ragan notes, however, “congestion pricing” fits into a suite of solutions that make as much economic sense as environmental.

Traffic gridlock has a huge economic cost, he said, citing the example of a plumber who can only do five jobs in a day instead of seven because of time spent driving between calls, or companies holding larger inventories because of higher shipping costs, translating into higher prices.

“We think of congestion as time waste, you all feel this viscerally and you hate it,” said Ragan. “But it’s actually worse than that. There are these other costs that most of us don’t experience directly.”

‘If we don’t jump on this, we will stay stuck in traffic. We will see our kids less, the prices of our goods will be high, our health will be less and our environment will be poor’– Chris Ragan, EcoFiscal Commission

The 49-page report is larded with fascinating factoids: That as much as 50 per cent of local congestion can come from drivers circling looking for parking; that 90 per cent of the goods we consume daily are transported by truck; that congestion directly costs Toronto about $7 billion annually and Vancouver $1.4 billion; that slow-moving vehicles are less fuel efficient and emit more exhaust.

The report looks at five congestion pricing models currently being used internationally in municipal pilot projects or full scale, and then proposes specific applications in four major Canadian cities — Calgary, Montreal, Toronto and Vancouver.

Local application is key, as geographic constraints have as much to do with congestion as traffic patterns and volume.

Municipal design will be crucial, but provincial legislative changes may be needed to permit cities to levy tolls and federal funding could help cover the start-up costs of pilot projects.

Road and bridge tolls date back to at least Roman times but have been largely rejected in Canada, despite widespread application internationally.

Ragan says part of the problem may be that governments look at tolls strictly as revenue generators, rather than a way to alter driving habits and encourage use of public transit. Combine that with an impulse to fight congestion by building more roads and the problem never gets solved.

“Over and over again we see from cities around the world, when you build more capacity you actually don’t reduce congestion,” said the economist.

“The underlying problem is the incentives that are at work.”

He calls congestion pricing “a perfect example of an ecofiscal policy, where you price the problem and you recycle the revenues to generate economic benefits.”

The incoming Liberal government won a majority mandate on a platform that included spending billions on infrastructure, including transit.

The commission study calls congestion pricing “the crucial, missing piece of a broader, co-ordinated package of policies” to complement new infrastructure.

“This is not the era of baskets and throwing in quarters – we’re beyond that world. This is a world where the technology is no longer an obstacle to doing it well—you’ve got transponders in cars and you can go into a limited-access HOT lane and it speeds up,” Ragan said. HOT stands for high-occupancy or toll lanes.

As Ragan puts it, mobility is a good thing and we need more of it. But building better roads and bridges combined with better public transit will still require an economic incentive to use that increased capacity in an optimal way.

“We need infrastructure, for sure,” said Ragan. “But you’ll get its maximum value if you put in some congestion pricing.”

“If we don’t jump on this, we will stay stuck in traffic. We will see our kids less, the prices of our goods will be high, our health will be less and our environment will be poor.”





Canadian wireless spending rose 14% between 2013 and 2014

The Canadian Radio-television and Telecommunications Commission (CRTC) today release its annual Communications Monitoring Report.

The main takeaway from the report, which provides a vital snapshot of Canada’s telecommunications landscape, is that for the time in Canadian history more of the country’s households now subscribe exclusively to a wireless service than they do to a telephone service. Specifically, 20.4 percent of Canadian households are subscribed only to a wireless service compared to the 14.4 percent that are subscribed exclusively to a landline service.

Communications Monitoring Report 20152This is part of a monumental shift that has occurred in the past 10 years.

In 2004, little more than half of Canadian households — 53.9 percent, to be precise — subscribed to a wireless service. By contrast, that same year 96.3 percent of the country’s households were paying for a landline. A decade later, those numbers have shifted to the point where 84.9 percent of households have a mobile subscription, and a still significant, though declining, 78.9 percent maintain a landline.

More and more Canadians are also turning to online video services. Netflix subscription rates among English speakers in the 18-34 years old age group rose from 29 percent in 2013 to 58 percent in 2014. Likewise, the same trend was seen with French-speaking Canada where the rate rose from 7 percent to 24 percent during the same time period.

What hasn’t changed is the country’s competitive landscape. Despite the rise of capable regional players like MTS and SaskTel, the revenues generated by the country’s top five broadcasting and telecommunications entities — Bell Canada, Quebecor, Rogers, TELUS, and Shaw — account for 84 percent of this country’s total telecom industry revenue.

Communications Monitoring Report 20153Moreover, Canadians continue to pay more to access these services. Since 2013, the amount the average Canadian household spends on communication packages has risen by $11.92 to $203.04. Like the rise in mobile usage, on average Canadians are spending more on wireless subscriptions ($79.8 per month) than they are on Internet access ($31.10 per month).

Canadian wireless expenditures rose 14.1 percent, from $69.33 to $79.08, between 2013 and 2014, the highest single-year increase to date.

Communications Monitoring Report 2015 1





4 Holiday Pricing Strategies Retailers Can Learn from Prime Day

This summer’s slow retail season was an open opportunity for bigger brands on the innovation front — and one in particular took serious advantage. Amazon redefined Christmas in July sales with the launch of Prime Day, exceeding its own Black Friday benchmark by 18% and selling 226% more than the same day last year. Although the deals might not have been what most shoppers were hoping for, Amazon set the bar high for the fast approaching holiday season and offered a few take-aways from which businesses of all sizes can learn.

Now, the holiday shopping season is right around the corner and it is time to finalize marketing campaigns, pricing and merchandising strategies for the most important selling season of the year. To help you compete alongside a pack of big box brands, we’ve gathered a few tips rooted in summer selling trends that proved successful, as well as Amazon’s Prime Day success.

1. Clear Inventory with Focused Sales

Though Amazon’s Prime Day was successful, many of the items promoted were likely discounted because they weren’t selling well anyway. If you have items that have been collecting dust in your warehouse, consider discounting them or even offering them as free gifts with orders that include your higher margin products. This will serve as a surprise and delight tactic that helps to win over customer loyalty, as well as get rid of slow moving inventory.

2. Realize that Pricing is Relative

Your prices matter, but only in relation to your competitors. Aside from those few unique products native to your own store, your sales are highly dependent on how your prices compare to larger brands and what value you’re offering for that price.

Be constantly aware of your competitors pricing and prepare to reconsider your strategy at any point. If you don’t have the bandwidth to consistently scan competitor sites, install an automated app which can do it for you.

Also, consider how your brand adds value to the overall customer experience and justifies a higher price. Are you offering increased customer support, a better delivery experience or personalized notes? What makes your experience standout when you are selling similar products as your competitors?

3. Space Out Sales for a Longer Holiday Season

Succeeding during the holiday shopping season is for long distance runners, not sprinters. No longer does shopping start after Thanksgiving. Last year, Amazon started their holiday sales the day after Halloween, while 29% of consumers began shopping before November. In fact, in 2014, consumer spending in October outpaced those in December by nearly $900.

Use well-timed sales to make it appealing for consumers with diverse shopping habits to check out your store. Begin as early as October and run campaigns throughout December to catch any late-comers.

4. Optimize Inventory Early

Prime Day showed Amazon’s ability to command sales and build buzz without the calendar dictating the timing of its campaigns. Despite this, the limited quantity of top products proved to be a frustration for customers. While advertising deals with a limited quantity can be a great way to create a sense of urgency, it might also damage customer sentiment toward your brand.

This holiday season, retailers that hope to learn from Amazon’s Prime Day should be sure to stock enough of the items shoppers really want. Stay up to date on Google Trends and other industry-specific reports to be prepared for holiday wish lists. Take advantage of the long holiday season and consider reordering a product if you realize it is resonating well with shoppers. The main takeaway here is to stock up early and reevaluate constantly to make sure you aren’t left with too much come December 26, or worse, run out of inventory before December 15.

In all, don’t finalize your holiday planning without looking back at this year’s industry trends as well as your own wins and losses. Follow Amazon’s Prime Day example and build awareness for your holiday promotions well in advance to fuel demand generation and site traffic.

Prepare for your larger competitors to implement aggressive pricing strategies and consider how your brand can offer additional value to the customer experience, without hurting your margins. Finally, be meticulous in your inventory management and stock levels.




Is American Airlines Shooting Itself in the Foot With Price Matching?

Is American Airlines’ strategy of matching competitors’ prices paying off?

As oil prices have fallen during the past year, pricing pressure in the airline industry has steadily increased. Markets targeted by low-cost carriers like Southwest Airlines(NYSE:LUV)and ultra-low cost carriers like Spirit Airlines(NASDAQ:SAVE) have seen some of the biggest impacts.

Incumbent carriers have reacted to these threats in various ways. American Airlines(NASDAQ:AAL), the largest airline in the world, has made a bold bet on price matching. Yet it has suffered significant unit revenue declines for the past few quarters. Does this mean its strategy is backfiring?

Pricing pressure heats up
American Airlines was one of the first airlines to report pricing pressure in a handful of domestic markets beginning in late 2014. It attributed the pressure to capacity growth by a number of low-cost carriers.

Airline American Airlines Plane Aal


Most notably, Southwest Airlines has dramatically expanded its capacity at Dallas Love Field since the expiration of the Wright Amendment last fall. This has affected pricing at nearby Dallas-Fort Worth International Airport: American’s largest hub.

Meanwhile, ultra-low cost carrier Spirit Airlines was a small niche carrier just a few years ago, but it has been growing extremely quickly. In 2015, Spirit expects to increase its capacity by 30.3%, while adding 15 planes to its fleet. As a result, Spirit Airlines has added capacity in markets across the country.

This explosion of low-cost carrier and ultra-low cost carrier capacity across the country has led to extremely cheap fares on certain routes, especially on off-peak days. This includes roundtrip fares of less than $100 on routes like Chicago-New York, Chicago-Washington D.C., and Dallas-New York.

Fighting back with price matching
American Airlines management first mentioned that it was matching low-cost carriers’ prices on the company’s Q4 earnings call in January. As the year has progressed, the company has become even more aggressive, though.

In July, American Airlines President Scott Kirby told a Wall Street analyst, “I think we are all-in now in matching everywhere.” Kirby asserted that this aggressive posture was working — markets where the company had started matching competitors’ prices were outperforming on a relative basis.

On the other hand, this hasn’t appreciably improved American’s unit revenue trajectory in the domestic market, where it faces the most competition from discount airlines. Passenger revenue per available seat mile, or PRASM, declined 1% on domestic routes in Q1, and then declined 6.2% in Q2. The company expects a fairly similar performance in Q3, and on the Q2 earnings call, Kirby opined that PRASM could continue declining until the second half of 2016.

There’s no good alternative
American Airlines has stated that routes where it’s matching prices are outperforming other routes. However, it’s possible that unit revenue would be higher still if it had, instead, cut capacity in markets where it’s facing the most competitive capacity growth in order to prop up fares.

The problem is, while that strategy might have bolstered unit revenue in the short term, it would have created even bigger problems in the long run. If American Airlines were to retreat in every market where Southwest, Spirit, and their peers are expanding, those carriers would be even more profitable than they are now. Those excess profits would likely be reinvested in future capacity growth.

In essence, American Airlines would be aiding the growth of its competitors. Additionally, those rivals would have strong incentives to expand in other American Airlines markets going forward, knowing that the latter would pull back to avoid a collapse in pricing.

It’s not clear whether American’s decision to aggressively match competitors’ prices will allow it to maximize its earnings in 2015. However, the real payoff will come later on. Hopefully, a bold price-matching strategy today will make competitors think twice before planning big encroachments on American Airlines’ territory in the future.