Data-based pricing: Increase revenues and profits with Startup Smart Pricer
If you book earlier, you pay less. – We all know dynamic prices from travelling. In other industries the topic is still new. The Berlin startup Smart Pricer helps companies to introduce the principle. And it focuses on fairness and transparency. On the way to Switzerland, co-founder and managing director Christian Kluge gives us insights into his work and reveals why mountain railways in ski resorts can benefit from dynamic pricing.
Christian, how did you and your co-founders come to found Smart Pricer?
Franz and I know each other from our time at Air Berlin, where we learned a lot about pricing. Then we were lucky enough to meet our CTO Sebastian, who comes from the Ad-Tech industry. At the time, we wondered why other companies didn’t work with clever pricing strategies. That’s how the idea for Smart Pricer was born in 2015. Then we took the first steps towards founding the company and held talks with potential customers such as Hertha BSC and UCI-Kinowelt.
How did you manage to further expand your customer network?
In the initial phase, we approached other football clubs and cinemas and were already able to point to initial successes. Through great interest in the topic of price optimization, we then also landed in other industries. We now have a great team and work with around 50 customers, including cinema chains, leisure providers, major Bundesliga clubs and mountain railways in ski resorts.
What do you recommend to companies who fear that their customers will not accept flexible prices?
In order for customers to accept flexible prices, it is important that you not only increase them, but also lower them. On the other hand, the pricing rules must be transparent. This means that you will definitely benefit if you book early, buy a multi-day ticket or use the service at times when there is little traffic. If, on the other hand, you come last minute on a day when everyone wants to go skiing or to a football stadium, for example, you pay a little more.
That sounds understandable. But why does one need your support?
Because of the complexity of the data and our experience in pricing. Example cinema: Every film that comes out works differently. UCI Kinowelt has about 20 cinemas all over Germany. Each week there are usually more than 200 screenings in a cinema, a total of more than 4000. If you calculate 52 weeks, you can understand why nobody can manage to keep track of this data alone or use it flexibly for pricing. This is where our many years of expertise and our automatic pricing software come into play.
Which data is particularly important for you?
The decisive factor is the sales data. Every time a ticket is sold, there is an entry in the customer’s system regarding the type of ticket, number, seat category, costs, etc. We import this into our software and use a machine learning algorithm to search for sales patterns. For example, we look at which days of the week or which season sections work well. Visitors prefer to go to football in summer when the weather is nice because it is too cold in winter. In the cinema, the blockbusters attract a large audience. The second step is that we forecast future ticket requests and the third that we derive a price from dozens of influencing factors.
Yes, I’d love to! A concrete example is the Zermatt mountain railways at the Matterhorn. The region is one of the largest and best known ski resorts in the world. We introduced Dynamic Pricing at the Zermatter Bergbahnen and last winter not only achieved a significant increase in turnover, but also an increase in the proportion of online tickets from 7 to 30 percent.
That sounds great! How did you manage that?
Well, by saying: If you book early, you get a better price and if you buy last minute at the checkout, you pay a little more. In Switzerland, it really went through the media. The Swiss television interviewed us and we were in the news of Switzerland. That led to many Swiss, but also foreign tourists, buying their tickets earlier. This is a win-win situation for the mountain railway and its customers. Customers benefit from lower prices. The railway has planning security and receives valuable customer data through online sales. Next winter, the Aletsch lifts will also be using our software in addition to the Zermatt mountain lifts. We are currently helping four more ski resorts to prepare an introduction of dynamic prices.
What should startups be prepared for, if they want to work successfully with established companies?
I think a big challenge for startups at the beginning is always the point of credibility. The Zermatt mountain railways have existed for many decades. We have only been on the market for a few years. Questions such as “Are they serious?” or “Will they still exist in a few years’ time? What helped us concretely was A, that we already had references with big, well-known brands and B, that we didn’t come fresh from university, but already have a few years of professional experience. We know what language is spoken in companies and how the decision-making processes work.
On the other hand, do you have a tip for established companies that are currently thinking about cooperating with a start-up?
Startups can help established companies change their mindset and bring the drive to innovate. In many companies there are clever minds, we call them champions who would like to move something fundamental, but cannot do it alone, e.g. because they lack special know-how and the necessary IT resources. When these champions work with startups, it’s a powerful combination.
What challenges do you face with your startup?
So far, we have tailored our pricing solutions to customer needs. The introduction was often a small project and mostly limited to ticketing. Now we have used our experience from working with more than 50 companies to build our new brand “th!nkpricing” and to enable price optimization for everyone – even outside of ticketing. We want to make data-based pricing, whether static or dynamic, easy for everyone to understand and access. At www.thinkpricing.com we help customers to question their current pricing strategy and to develop or apply a new one. For this purpose, we are currently working on a number of self-service tools for price optimization. Our goal is to connect people who are interested in innovative pricing strategies and to provide tools with which everyone can start to optimize their own prices without expensive consultants.
LinkedIn: Christian Kluge