We partnered with Auto Rental News to survey the industry about pricing strategy, dynamic pricing moves, remarketing and other key concerns. Most of the answers surprised us. Read on to be surprised yourself.
Pricing is the priority
Respondents, who were managers or higher (0% were individual contributors, with 7% being in administrative roles), reported that retail rental pricing was their company's "highest priority" ( 57%), with fleet acquisition and remarketing second and third respectively–by wide margins. Surprise? (Ok, this may be because the people who did the survey were focused on pricing... and frequently the two divisions don't interact much).
Fleet planning and remarketing drive substantial profits and require careful thought and planning, as well as a lot of manpower. Pricing tends to be isolated in a handful of people, with well oiled routines. Why is pricing overwhelmingly the most important focus?
Because... pricing is dynamic
Just like the weather, the pricing climate depends on where you are.
But it also depends on who you are, and who else is near you. As you can see, while some respondents saw prices down this year, just as many (more, in fact) felt they were either about the same or up. More than 2/3 said the pricing dynamic is the same or better than last year.
When asked why, 32% attributed the change to a "new pricing strategy by our company." Think about that for a minute. That means that they themselves changed their experience by taking action with pricing (and yes, this correlates with prices being up). Whether they implemented dynamic pricing software or did something else to increase their daily dollar average, they saw the impact of their pricing actions.
Meanwhile, Uber and Lyft get scant mention–only 4% pointed the finger at ridesharing as a cause of lower prices, the same percentage who thought a new competitor had an impact on pricing.
Turns out, the mass media is wrong. All the fear mongering plaguing the industry (and it's public share prices) might not be real–or justified.
Companies aren't "satisfied" with pricing–but not unsatisfied, either
Only 5% of respondents were "extremely satisfied" with rates customers pay, while 20% were unsatisfied. The majority seem basically resigned and mildly satisfied.
That may seem like an ok situation–until compared to utilization. Eighty-five percent of respondents were at least somewhat satisfied with utilization–24% were extremely satisfied.
This leads us to the surprising conclusion that people are managing utilization really well–but they're selling out early and leaving money on the table, or have too few cars around (or the market has too many) at key times.
Another possible explanation is that their pricing group is too focused on utilization, and as a result doesn't get the rate they could when they could, with incentives primarily focused on getting cars on rent–not maximizing profits.
Room for improvement
Almost nobody – less than 5% – felt their pricing is "extremely optimal", while the majority (85%) felt it was either "Very optimal" or "Slightly optimal". That translated into 62% saying they lose at least "some" money due to their pricing.
That may be due in part to the limitations of staffing. Only 76% of respondents "actively manage" pricing at "every location". Key to revenue management as one veteran told us is "constant vigilance", and fully 1/4th of respondents know they're not being vigilant.
Competitors in the mix
There is high mutual respect for competitors, with 84% of respondents saying competitors are doing at least a "somewhat effective" job.
And that's important because 14% of respondents base their pricing entirely on their competition, with a further 29% basing "some" of their pricing on the competition. Nobody reported not having competitors and only 5% ignore competition entirely in their pricing.
The high respect for competitors–and view that pricing moves have a big impact–surprisingly show that maybe pricing is more rational in the market than many would have you think. And that if some in the market raised rates, perhaps others would follow given the mutual respect.
Pricing is a complex and dynamic subject (we wrote a book on dynamic pricing strategy, after all) and we learned that people in the industry have very complex and dynamic views on it. We were as surprised to see the level of mutual respect for competitors' pricing strategy, in this anonymous format. We were also surprised that respondents identified themselves as the main driver of pricing change in their market–something we would like to see more of.
If you'd like to learn more about the study, or how Perfect Price uses AI to manage prices for some of the most respected companies in the industry, click here.