I came across this advert from Canyon Sports in Utah, which partners with the ski areas to offer discount lift tickets when purchased in the shop. @EvanReece had this to say: “on the way to everywhere” (and competing rentals) is exactly why resorts should avoid ski shop discounts.”
I didn’t see what was so wrong with this program. One obvious angle is price discrimination: it’s a way to maximize revenue from the most price-sensitive customers . But surely ski resort marketers have considered the risk/reward of programs like this, right?
So I chatted a bit with @EvanReece and @slopefillers about the topic. @slopefillers replied, it’s bad because of competition, “Resorts have their own rental/gear shops. … no advanced purchase. No-locked-in revenue.”
A Note on “Competition”
All businesses would prefer to be monopolists, and to some extent the on-resort boutiques are quasi-monopolists, but competition keeps them in check, at least a little bit. It’s not a dirty word it’s what keeps them (relatively) honest vis-a-vis their customers. Also, my gut tells me that gear shops on-site don’t really compete with shops in suburbia , and that almost nobody goes to the resort with the specific intention of buying skis, snowboards, etc.; on-resort shops are basically there for impulse buys and emergency purchases, or precisely those customers who aren’t going back to town to make a purchase.
Editor’s note: Gregg from SlopeFillers points out in the comments below that ski resorts make a good chunk of their revenue from the rental department, and that with programs like this, the shops may be capturing more of that revenue instead. I didn’t comment on this specifically because I don’t have much to say that isn’t summed up in the above paragraph. I bet it is a small percentage of people who are renting off-site, and if so, price is probably (again!) the motivating factor for this decision. Ski areas can compete on price. If they choose not to, whose fault is that? Whether it makes sense to offer discount lift tickets at an establishment that also competes with your cash cow rental business is another question. Again, I’d wager the marketing folks have assayed the cost/benefit of this. If not, again, they’ve got no one to blame but themselves.
What’s the Real Problem?
Evan notes, if I may paraphrase, the internet is ruining it for everyone. If people can buy these tickets and re-sell them, or if there are zero limits on their use (abuse) this throws a wrench in an otherwise viable system. He observes what I’ll refer to as “Evan’s Law”,
consumption of undated deals matches natural demand = lowest effective yield during highest utilization rates.
Slightly modified I think this is a really, really good observation . Let me translate: If you have discount programs with no restrictions, eventually so many people will use the discount program that revenue will be less than what it otherwise could be, since there are people who would pay more, but are paying less.
Basically this describes the inevitable consequences of a poorly-executed price discrimination campaign. So it’s not the concept in general, but the implementation which makes these successful or problematic for the business. Evan agrees, “it is how you control [the discount programs] and whether they are appropriately priced to their relative restrictions.”
And I think that last nuance is what’s missing from @slopefillers’ responses which emphasize date-restrictions the customers. The number one rule of every business is that your customers sign your paychecks, so you’re in business to keep them satisfied , and when I see something like this it just makes me think they don’t care about the customer after the money’s changed hands.
Unless you’re offering insane-o! discounts (I have seen $9 lift tickets on Liftopia before), locking people in to a specific date seems short-sighted. With satisfaction and providing the best possible experience in mind, date-lock might just be a wash. If customers are stuck redeeming their tickets in inclement weather, or forfeiting them, that might leave a bad taste in their mouth and they may think twice about visiting your mountain next time. I think it’s certainly important to lock the revenue but advance purchase requirements can still allow at least some redemption flexibility.
Of course this is just my opinion, ultimately with enough competition from programs like Liftopia, buying direct advance purchase through the resorts, and shop partnerships, I’d expect to see a variety of options that better match price to restrictiveness.
As always, the challenge is to find ways to increase revenue while keeping your customers happy. But if you’re not keeping an eye on the long-term and adding value for your customers, as opposed to merely extracting as much as possible from their wallets, then you’re doing it wrong.
What does the future hold?
@slopefillers suggests Liftopia’s Cloud Store (profiled in TWBiz) as an alternative to the current model, I think it’s still too restrictive, but given time I’d expect a bit more flexibility to emerge. Want the super-discounted lift ticket, fine, but it’s only good on Tuesday mornings. Want a little more freedom? OK, but it’s gonna cost a bit more. Like everything else in life, if you want more, you usually have to pay more.
Regardless of how you’re doing business, whether via partnerships, Liftopia, or some crazy new shiz that hasn’t even been invented yet, ultimately the only way to differentiate good campaigns from bad ones is by continuously evaluating them to ensure each makes good business sense and is achieving its goals.
Ultimately I don’t think discounts are bad per se. They can be a powerful tool for maximizing revenue but you’ve gotta make sure that your efforts are working, which means measuring them for success (or failure!).
If it’s not working, fix it and if it can’t be fixed, scrap it and put your brain to work coming up with something better.
1) A complimentary, but abstract angle to the “price discrimination” tactic is the possibility that partnerships might create long-term customers for both: the shop benefits by selling some gear to the skier who previously got “discount” lift tickets, the ski resort benefits by getting a lifelong skier who will hopefully become a more frequent customer of the resort. I don’t know if the data supports this but it’s an interesting hypothesis which might be worth looking in to.
2) A stronger case can probably be made for “destructive” competition in the rental departments versus retail (mentioned above) or lift ticket sales. In any case, this is a gut feeling I don’t have anything but anecdotal evidence to support it, like how there were zero people lined up at Salty Peaks for discount tickets but dozens in line for full price tram pass at Snowbird the very same day…
3) I think “matches” is a really terrible choice of words. “Approaches” or “tends toward” would be better, but still grossly exaggerates the relationship. In any case, I’ll blame this on twitter’s character limit rather than hang him for it.
4) Another one of my hunches based on my research experience: customers who are the most price-sensitive are probably the least likely to return if they have a bad experience. There seems to be ample research on the subject. Here’s one study that suggests satisfied customers are more willing to tolerate price increases [PDF].