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DecisionNext Blog

Disney dares dynamic pricing; Will you?

Published by Janette Barnard June 29, 2018
A recent article in the Wall Street Journal raises some thought provoking questions and ideas for meat and poultry operators.
“Disney parks executives are working on adopting a dynamic pricing model similar to airlines, in which prices fluctuate depending on when a ticket is purchased,” the WSJ article stated, adding, “Disney already has introduced a limited version of dynamic pricing to its parks, charging a range of prices based on three categories of dates: ‘value’, ‘regular’ and ‘peak’…. Under the changes being considered in recent months, a ticket to Disneyland for Christmas Day, for example, may cost less if purchased on July 1 than on Dec. 24, this person said. Such a system would encourage visitors to commit to a day to visit the park farther in advance than they currently do, this person added, which allows parks to plan better.”

You might be thinking, “But this is the meat business. To some degree pricing for even the most value added products are still tied to the commodity market and our customers are price sensitive, so this won’t work - we don’t have the flexibility Disney does.”

I get it. There are few products on the face of the planet as price inelastic as a day pass to the Happiest Place on Earth….and let’s be honest, ground beef isn’t one of them.

Even if the percentage range you have to play with is less than Disney’s, the principles of dynamic pricing still apply to meat and poultry.

In the meat and poultry business, there are multiple ways to structure agreements to arrive at a product price: cost plus, tied to USDA published prices, negotiated spot pricing, tied to a grain index, negotiated long term pricing. You can manage pricing centrally with limited flexibility for sales reps or you can set loose guidelines or turn sales reps loose.

But stepping back from pricing structure, what is your pricing strategy? This includes ideas like:

  • Making the tradeoffs explicit between minimizing risk and maximizing profit to make risk aware pricing and sales decisions...on purpose.
  • Using price to manage or direct demand to impact operations. Notice how Disney acknowledges the impact of predictable demand on the entire business? Imagine a similar impact on plant operations.
  • Building confidence in forward looking price projections in order to capitalize on market peaks and valleys to shift demand. If you could shift demand with pricing incentives, what would that mean for your business?
When it comes to pricing (and….all things growth management, really) there are three general approaches:
  • The Head in The Sand. “I do it this way because my boss did it this way and we’ve always done it this way.”
  • The CYA. “I stay on the market. I follow what my customers tell me my competitors are doing and I stay with the pack. I don’t take risks - we won’t win big but we won’t lose big either.”
  • The Innovator. “I find new ways to price based on better market intel. I don’t benchmark against competitors, our benchmark is against the best possible decision in the future market.”

Which of these approaches describes you? Your team? Your senior management? Your board?

Dynamic pricing is how airlines price to maximize revenue, it’s how Uber prices to insure the supply of drivers equals demand from riders, and let’s not kid ourselves, it’s likely to become part of Amazon/Whole Foods’ pricing repertoire.

How are you building pricing strategies and capabilities for tomorrow?

I’ll close with a favorite quote I found last year at the Walt Disney Museum about the legend himself:

“Walt could never tolerate the guy that was self-satisfied with his art. Walt was obsessed with the idea that in life you just continually go to school. You never reach any plateau of perfection. And he practiced that in everything he did.”

This article was originally published on Meatingplace.