In an effort to rise above the competition and increase revenue, ABP stepped up their marketing efforts with a Pay-Per-Click (PPC) campaign. With this initiative, ABP was able to obtain a high volume of parking reservations at the price of $4.99 per day. Since their low parking prices resulted in a spike in reservations, ABP concluded that more must be better, so they raised their rates by $1 per day for the month of July in hopes of obtaining a higher profit margin per reservation.
After a month of advertising the $5.99 rate, ABP compared the reservations and profits of previous months when they promoted the $4.99 per day parking price. ABP realized they lost more than 30% of the reservations and profits normally received in July despite the increase in price per day.
It was clear after analyzing the data that there was a pricing “sweet spot” in ABP’s market that was missed. ABP learned that in the case of price setting more is not necessarily better. They also learned that knowing your market and studying your data should determine pricing decisions. Lesson learned, ABP then lowered their rates back to $4.99 per day.
After lowering the parking rates back to $4.99 per day, ABP’s immediate results showed a 40% increase in parking reservations and a 34% increase in profits. More customers were willing to book with ABP at the $4.99 per day rate rather than the $5.99 per day rate.