Seasonal pricing is nothing new. The airline and rental industries have been changing their prices seasonally for years to maximize sales.
Of course, retailers also use this pricing strategy.
For some businesses, having prices that fluctuate seasonally is essential to their success. Shopper spending habits are rarely the same for long and increasing prices during the holidays helps to capitalize on sales when they are happening more frequently.
But choosing how to create your seasonal pricing strategy is a complicated skill in and of itself. There are several factors to consider, and a lot of planning is involved so you can have your strategy mapped out well in advance.
Your seasonal pricing plan needs to accommodate fluctuations in demand, so it’s important that you keep them flexible.
What Is Seasonal Pricing?
Seasonal pricing is when a business charges more during a “high-demand” season, and less when there’s lower demand.
This can be a literal season, like beach condos having a higher rental cost in the summer, or a local season, like hotel and Airbnb prices going up during football season near whichever stadium is playing, especially for the Super Bowl.
As mentioned before, seasonal pricing is an especially popular strategy with hotels, airlines, travel agencies, and other businesses that traditionally have on and off seasons.
What Are the Benefits of Pricing Seasonally?
Despite its name, a seasonal pricing strategy can benefit your business throughout the entire year. By repricing products to fit with current demand, you’re able to maximize profits year-round.
Many companies use lower prices during the holiday season to draw people into their products, and away from competitors, creating long-lasting customer relationships that remain lucrative.
Customers are more likely to make purchases when items are discounted or on sale, especially if they know that the product in question is usually more expensive. This is the perfect time for brands to reel in shoppers they wouldn’t normally appeal to.
For example, when looking at a particular brand of two-person tents, we can see that there’s up to a 20 percent difference in price between winter and spring, based on Wiser Solutions data. People are more likely to go camping in the warmer months, making the demand go up. A lower price means enticing more customers and making more sales. In the winter, when camping is less common, the tent prices go back up while demand is low.
Many brands will take advantage of this type of pricing, so it’s important that you plan your strategy ahead of time so you can stay ahead of the competition. The holiday season sees more purchases than the rest of the year, so winning the sale during this period is crucial.
How to Develop Your Seasonal Pricing Strategy
We’ve covered the benefits of incorporating seasonal pricing. The next step is actually formulating your strategy and implementing it.
How Low Are You Willing to Go?
While it’s true that a seasonal pricing strategy revolves around discounting prices, the ultimate goal is still to pull in as much revenue as possible. That’s why it’s important that you set a minimum and maximum price for your products.
The minimum should be the absolute lowest you’re willing to price your products and should still allow for a profit margin that your brand is comfortable with.
Remember that you will only be implementing a seasonal pricing strategy on products that have on and off seasons, so your profit on products that remain static year-round won’t change. You also need to consider that even though lower prices mean lower profit per sale, it also likely means more sales overall.
Define Your Seasons
Despite the name of the strategy, “seasonal” doesn’t always refer to the literal seasons of the year. For your brand, seasonal can mean a particular holiday or yearly event.
For example, the prices of roses or strawberries typically go up around Valentine’s Day. And mini fridges are often on sale at the start of the school year, an item often associated with dorm rooms.
Looking at your historical data, take note of any times of the year when your products are being bought more often and consider why this is. If there’s a discernible pattern, then you should have your seasons defined clearly and be able to formulate a strategy around these time periods.
You should be able to break the year into three key seasons:
- Peak Season – When demand is at its highest
- Off Season – When demand is at its lowest
- Shoulder Seasons – The time right before and after peak season, when shoppers might still be invested
Identify Any Additional Seasons
After you have clearly defined your key seasons, look for other mini seasons that can help fill the gaps. Demand-based pricing can work for these shorter time periods as well, maximizing the amount of revenue your brand pulls in.
For example, depending on your products, holidays like Christmas, Easter, or New Years are consistently lucrative. You should also consider local events like homecoming, fairs and festivals, or other public holidays. Any of these can cause an increase in demand.
Set Seasonal Rates
Setting your seasonal prices isn’t a quick and easy job. You have to gather and analyze competitor data to make sure you’re pricing competitively, especially when products are in high demand. You need to find the right prices that work for you.
Your seasonal pricing plan needs to accommodate fluctuations in demand, so it’s important that you keep them flexible.
Don’t be scared to try out different rates and see which work for both you and your customers. Sometimes discounts that are too low can lower customer perception of quality but keeping the price too high will drive away shoppers who are looking for value.
Look to the market and your competitors to get insights into prices that are working or not.
Seasonal pricing is different for every brand and every product. There are many factors that could change what the right prices are for you.
Consider using a tool like Wiser’s Price Optimization to make sure you are setting the right prices for your business automatically, taking all necessary data into account.
