Imagine putting on a performance for an audience–but nobody shows up. Sucks, right? Some people just lived with that reality, figuring, it's normal. But Kevin Stutz, CEO of Ace Rent A Car, thought differently.
Here's how Kevin took on an industry scourge–the no show–and won. With real numbers.
The no show problem
Car rental customers expect the cheapest price. And, the thinking went, most also expect not to pay anything until they pick up the car. Frequently, 20-30% of ACE's customers would fail to materialize. For some companies, this can be as high as 50% some days.
This causes serious lost revenue pain. You had banked on making $40,000 tomorrow. Whoops–you left $10,000 cash in the proverbial TSA bin. Sucks, right? Want to know what sucks more? Your competitor picked up $8,000 of it.
Why would customers no show?
There are good reasons people no show for a car reservation. These range from a flight cancellation to arriving early and picking up a car, but failing to mention their preexisting reservation.
Then there are bad reasons, ranging from changing travel plans, and not telling the car rental company (why bother?) to finding a cheaper car at a competitor while waiting for checked baggage–and going to that counter instead.
All of these wreck havoc on a business. Do you resign yourself to being half-empty some days? Or do you overbook, guaranteeing angry customers at least a couple days per week? Do you have employees sitting around with nothing to do when half your customers fail to show up–only to be understaffed and disgruntled when more customers than expected show up?
How Kevin eliminated no shows
Car rental customers will prepay for a discount. Orbitz, Travelocity and Expedia proved this long ago. Yet, car rental companies have been slow adopters, assuming their customers were unwilling to change. Kevin challenged this assumption.
By charging up front, Kevin found that a 5% discount shifted 50% of "free cancellation" bookings to pre-paid, non-refundable bookings. 10% off resulted in 85% switching to prepaid. That means ACE now has the power to eliminate no shows on more than 85% of its reservations.
Perfect Price's research shows that, while transformative, this is only the beginning. By pinpointing the exact right discount for each market, car and time of booking, ACE could achieve 90% prepaid with an overall average discount under 10%.
It seems like a simple price optimization–5% or 10% off to forfeit the right to pay later and not show up–but the implications are huge.
The bigger no show picture
Eliminating no shows changes more than keeping your cash in your pocket. Yes, 40% more people show up and pick up their car–if this only costs 5%, you're way ahead financially. But the benefits extend much further:
- Better service levels because staffing is more straightforward knowing how many customers will really show up.
- Competitors can't steal your customers if they're prepaid.
- You don't pay for marketing on customers who no show, whether that's Sabre or Google, because prepaid customers show up–and if they don't, you still get paid.
- Staff retention and they job ratings improve because you've eliminated the miserable experience of being overrun when reservations unexpectedly show up–and the boredom when they don't.
A simple change, with a big financial impact, can have implications beyond saving you money.
Would price optimization for no shows work for you?
Price and packaging–like a prepaid package–is just one lever to control issues like no shows. While ACE has learned a lot, there is still more to do. Kevin says it best: "The solution is to keep exploring the messages our customers send us through data."
If you are in an industry where no shows are a problem, our pricing software may be able to help you use your data the way Kevin used his. Contact us to learn more or even schedule a demo.
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