Maximizing Rental Revenue with Pricing: Rate-Based, Fixed Durations, Variants, Weekdays and Seasonal

Karri: Today we are talking about this dreamlike rental business and how you can achieve it. Let's start with pricing and with pricing you want to make sure that you are charging the right price based on let's say season or weekdays or holidays or anything like that.

Tuomo: Exactly, and at the same time you probably want to make sure that your pricing is optimizing maximum value. And what I mean by that is that you have logic in place where if someone books for example seven days compared to one day, if your one day price is 100 bucks, your seven days probably shouldn't be 700 bucks. You probably want to give a somewhat of an automated discount on additional days or weeks to encourage customers to book a longer period. Because then as a rule of thumb, every time your stock is out with the customers it's out there earning, and every time it's in your stock it's not earning. You kind of want to encourage customers to maybe book one day extra just in case, and you can facilitate that with pricing.

There are essentially I think two ways on how you can start to price your bookings and these can coexist, it doesn't have to be either or, at least in Twice 2.0. The simpler to understand is kind of package price, fixed package pricing, meaning that you create a duration like three days and then you give that a price. Then the end customer when browsing through your offering can see that as a price option and then can see whether that price option is available to be selected on any given start date. These packages could also be a bit more conceptual, meaning that the three days could have been defined as a package called "Weekender." So it's a duration of three days but it's only purchasable on Fridays, thus it's kind of practically a weekend booking for which you might want to give a discount or which might be more pricey depending on your business.

The other way on how you might go about things is then rate-based pricing. Rate-based pricing is something where you define a rate for a duration. So you kind of say that a day costs $50 and then you might say any additional day costs $40. So this way you allow your customers, instead of selecting a pre-made package and selecting when are they looking to start that package, you allow your customers to say "When do I want to start my booking and when do I want to end my booking?" And then this kind of rate-based pricing automatically calculates the price for that duration.

In a simple case, you have maybe one duration like a day and then you've given it a rate, and then inside you can also rate different weekdays higher or lower. You can go quite complex there if you want, but on a simple case, you usually have a kind of a base rate and then the rate for additional days. And where I think things gets interesting is then that you can create different rates simultaneously. So you might say that a week costs $200 and the additional week costs $150. At the same time, you've said that a day costs $50 and additional day $40. This allows then customers to have an experience where they see that if they book a week it's that $200; if they book a week and a one day, that ends up being $240; if they were to take two weeks that would have been $350. So it kind of always calculates what base to use first and then price to fit the biggest duration that it can and uses its additional price when calculating the price. The big point here is that this allows you to have this kind of sensible discounts for longer period of bookings and encourage your customers to kind of optimize for length, which usually means that your stock is out there working and earning cash for you.

Karri: Absolutely. So there's a lot of different options how you can work inside weekdays and durations, like how long the actual rental period is. And then there is also the seasonality. So let's say for example a ski resort, like during ski holidays, Christmas holidays, there is probably just more demand and you maybe want to have like a completely separate pricing for that period where everything is a little bit more expensive. Or vice versa, during low season you might want to have like all the prices a little bit lower.

Tuomo: Yeah exactly. And there's seasonal like let's say date/time period of a year level approach to it, but you also might have pricing for loyal customers or pricing for the locals. So you might want to cater the local community with a special price point because you know that they are at the end of the day that customer base that keeps your business alive when it's low season and so on. So there are very different kind of aspects to the pricing. Time is one, this kind of customer status might be one, and you can attach quite many different rules to your price tables and when do they apply.

Inside those price tables, you might want to use rules like rate-based and then define some pre-built packages also. And all of these can still live under the umbrella, at least in Twice, where you can say that for this listing I still have a minimum and maximum length that a customer can book. So your pricing logic doesn't have to be limited by some other limitations that you have like the minimum duration. You can set that separately for every listing and just create a pricing rule that generally applies to any listing that you apply it to, and all of the lengths, and then you can separately control the availability of that listing.

Karri: Okay, and to my understanding Twice, especially the new version, is actually built to support all of these different use cases. So there is the rate-based pricing, fixed packages that you can limit to be only available on certain weekdays, and then you have possibility to create completely separate prices for some seasons.

Tuomo: Yep, 100% yeah. And specifically and precisely said, Twice 2.0 is built for that. Some of these features that we listed weren't available in the previous version of Twice 1.0 and thus these are big improvements on the release that we're introducing.

Karri: Sounds good. And maybe one more thing related to pricing is also the possibility to have different prices for different variants. So if you have let's say a listing that is enabling you to book maybe different sizes or different tiers, so there might be like pro version or beginner version of this, and these variants can also have a different pricing.

Tuomo: Yeah 100%. I think mentioning variants, I think it's always sensible to say that when does something become a variant and when is it just a separate listing? That's actually in many cases a preference by the merchant and it's a preference like how do you believe that your customers end up finding the end solution the best way. So sizes often I think the standard tends to be that as it doesn't necessarily have a price implication to it, you might use that as a variant instead of creating separate listings for all of the size of bikes you have.

Things like additional sales or like a pro model versus standard model, those start to be maybe things that it can be either/or. And both can be actually true at the same time, so I might have separate listings or then inside a listing I might want to make it a selection for the user. And then in that case you probably want to have that price increase for the pro model compared to the standard model. So in Twice 2.0 you can have variant specific pricing, but it's good to kind of always remember that it is at the end of the day when we talk about variants we're talking about what kind of a purchase experience do you want to provide someone. So how do they kind of drill down to your catalog? Is it sensible that they're looking at kind of these different variants on a listing level and comparing listing to listing? Or is it more sensible that they're looking at one listing and then inside they're making decisions and seeing the effects of those decisions?

Karri: Absolutely. And that's maybe something that comes to my mind is like the productization or the flow how you are actually sending the customer to your let's say Twice online store. So if you have some product page that you are actually driving traffic, you might want to show a lot of options there. But then on the other hand you might direct them to your let's say home page of your online store where they can see the whole inventory or some collection category page. But if you want to send like some special new product that is there and maybe you want to already like showcase all the different variants on that, so that's probably something that the merchant can kind of test out.

And as you mentioned, in Twice both can actually be true. So the really nice thing about the Twice 2.0 is the complete separation of listings and inventory, and you can have multiple listings pointing to the same inventory articles and kind of test out if you want to have one listing with a lot of different variants or separate listings and still utilize the same inventory.

Tuomo: Exactly. And it might be obvious but not all of your listings that you've created you can define that they're not visible in the let's say standard catalog that someone gets access when they browse your online store. So some listings can be only accessible with a direct link for example and not be visible in your online store. And this is super helpful if you want to do those kind of campaign things or a listing that is promoted as part of an email promotion by I don't know a partner or a hotel that you partnered with, where you want to provide these kind of variant specific selections and maybe keep some things more simple and maybe a little bit separated from the overall user experience that you have in your online store.

So this kind of ability to create listings for single purposes, and like you said not listings being separated from the inventory in the sense that they can all link to the same stock items via rules rather than having this kind of own inventory for every listing, that's really at the key when you want to optimize your rental business and kind of do these experiments and partnerships where you really, really want to make sure that you can very flexibly productize and create campaign listings and so on without making your overall catalog super messy.