A member of the RevPARTY team recently had a yard sale and it was very successful (at least to our team who’s yard sale expertise is much less than our vacation rental knowledge). However, being very analytical people, we naturally tracked some metrics throughout the weekend and after years of pricing product and driving revenue we couldn’t help but try and maximize revenue.
After the weekend came to a close, the numbers were tallied, and the unsold items stuffed back in the garage, we discussed all of our observations from the weekend and were slightly surprised how closely our garage sale learnings related to the short term rental lessons we consistently teach. Especially, when and when not to drop price. Regardless of experience in, familiarity with, or knowledge of revenue management these revenue management tips are distilled down to insights that anyone can incorporate in their revenue strategy.
THE YARD SALE
Our yard sale saw great traffic. There was a huge rush first thing Saturday morning, people trickling in and out throughout the day, and an empty two-hour period around lunch. Throughout the weekend we averaged $5 in sales per person but all of those sales weren’t as steady and consistent as the clean average may convey.
DRIVING TRAFFIC
We knew that more traffic was key to a successful yard sale. Like any sales funnel, the more people that feed the top of the funnel the more sales get converted. First, we tried to differentiate our product. Instead of the played-out yard sale signs you can buy at any store we bought bright neon poster board and filled it with bold, block lettering of phrases like “Treat Yo’ Self, Yard Sale ->” or “This Sale SPARKS JOY!”
A few hours into our yard sale we noticed a dip in traffic, but we allocated it to rising temperatures and the die-hard bargain hunters having already made their rounds. One of us made a run to the corner store to make change for more one’s and noticed two of our signs had fallen. Within minutes of fixing the signs the traffic picked up again.
During this time, dropping price would not have increases our sales. Regardless of price nobody was interested in our product. Nobody even knew we were an option. Likewise, if a vacation rental isn’t getting enough traffic dropping price won’t increase sales. What it will do is sacrifice dollars on the few sales you do get from the customers that were prepared to purchase anyways.
Revenue managers often attribute sales to a drop in price even if may not be the case. If there are open room nights and a rate decrease occurs its easy to say the price drop increased sales. However, those customers may have purchased at your previous price and lucky for them they just didn’t show up until after prices were slashed. That’s why it’s important to conduct deeper analysis to understand normal booking curves and booking behavior, listing traffic, and price elasticities.
If we had dropped our prices at the yard sale it wouldn’t have mattered because people didn’t see our signs and never stopped by to consider our products.
UNDERSTANDING YOUR BUSINESS
Our average purchase was much higher than our revenue per person. That’s because a large majority of visitors left with empty baskets. Sure, we sold many items below $5 but a majority of customers bought larger items or larger bundles. This would indicate our individual item pricing wasn’t too high, those who made purchases were spending more money after all. This informed our sales strategy, to encourage these bundles and higher priced items when the opportunity presented itself.
Likewise, vacation rentals need to target their customer. Lowering price could appeal to a wider audience, maybe advertising could bring in more views, but targeting couples with a three-bedroom apartment is never going to be an effective strategy. If your unit is on a cozy beach retreat short weekday stays are rarely going to happen. You have to target the customer that’s right for your product.
Regardless of our prices nobody was going to find old stamps for their collection at our yard sale and many were not interested in our selection of seldom used home décor. We had to take advantage of visitors that showed a qualified interest and drive larger item bundles and big-ticket items.
SEGMENTING CUSTOMERS
It was often hard to distinguish what a particular visitor was looking for but after reflecting on the weekend it was clear that there were clear trends.
As soon as it was light outside Saturday morning a huge swarm of visitors quickly came through. They showed a wide interest in multiple items but rarely purchased and often seemed dissatisfied with the price. This crowd was the hard-core yard salers who were looking for a bargain. They weren’t trying to purchase a specific item and weren’t really interest in the items we had. They were interested in finding a deal.
In this instance, dropping price would’ve led to more sales. However, we also would’ve had to let go of inventory and extremely discounted rates. In retrospect, this was a time to get rid of items unlikely to sell where some money is better than no money.
In contrast, fewer shoppers showed up in the late afternoon. However, almost everyone that did show up bought something. Maybe those shopping later were looking for specific items, maybe they planned on spending some cash on something that caught their interest, or maybe they were just committed to making a purchase after drudging through the 100 degree weather.
In the late afternoon our prices were rarely negotiated and we converted at a much higher rate. The key was differentiating from other yard sales by staying open later and providing ourselves the opportunity with those customers.
As we previously said, targeting the right customers is important. Its also important for vacation rental managers to segment their customers. Targeting the right people, at the right time, in the right way leads to a much higher conversion rate and prevents you from leaving revenue on the table through unnecessary price drops. Knowing that business travelers usually stay on weekdays and book during the week and leisure travelers most often stay on the weekends and book on the weekends can allow you to tailor listings, prices, and marketing to increase your RevPAR.
A FEW EXTRA INSIGHTS
- People are bad at pricing. When asked “what price do you think is fair” people rarely were able to provide an answer. Potential customers don’t know what your product is worth but they still make a decision to purchase it or not. Be sure to convey your products quality and educate potential guests on why your price is a great value.
- Use any opportunity you can to upsell and cross sell. The bargain hunters loved bundles because it offered better value and some random people looking for particular objects would pick up a $2 puzzle. Present your guests with options to increase RevPAR and provide them more of what they want.
PUT THESE YARD SALE TIPS TO ACTION
Even a yard sale makes it clear that there are always opportunities to increase revenue. Insights from deeper analytics, customer segmentation, and pricing strategy allows vacation rentals to drive traffic, increase conversion rates, and maintain higher rates with higher occupancy. RevPARTY has helped way more clients do this with their vacation rentals than they have for yard sales but these principles are applicable to both businesses. For help with your vacation rental management (probably not your yard sale) turn to RevPARTY for results.