Retail Commercial Real Estate Research
The industries that use dynamic pricing include transportation, hospitality, software, supermarkets, produce, and large retailers like Amazon. Pricing can be based on groups, time, personas, value metrics, or demand.
- Dynamic pricing is defined as tailoring the price of goods or services for specific customer preferences. To have effective dynamic pricing, it is necessary to have a deep set of data on demographics and market conditions.
- Because of this requirement, to date, dynamic pricing is not commonly used by a wide range of industries. The most common sectors which use dynamic pricing include transportation, hospitality, software, supermarkets, produce suppliers, and online retailers like Amazon.
Impact on Customers
- While customers may accept that prices change, they get incredibly annoyed when they are targeted by dynamic pricing. Even though it can be used to save money, it is also used to increase the margins of the business. That means customers who purchase at the high end of the range feel like they have been overcharged. When customers find out others have paid less, the result is customer alienation and a decrease in customer loyalty.
- On the other side of the coin, shoppers who have figured out dynamic pricing are gaming the system. Knowing that if they shop around too much, the price will increase, shoppers are beginning to use incognito modes on their browsers for product research, which limits the amount of information the seller can collect.
Impact on Companies
- Consumers do their research online before they purchase. When they decide to purchase, either through a retail store or online, and the product is priced higher than they were initially told, they won't buy it and will go elsewhere.
- The other impact of dynamic pricing is that it can result in a price war. Eventually, the price can become so low that the company can no longer make a profit and cannot sustain itself.
- If a company is going to use dynamic pricing, the best strategy is to be open and transparent about when and why dynamic pricing is used.
How to Implement
- Dynamic pricing can be based on groups of people.
- This segmentation can be done as simply as an either/or test.
- It can also be done in a more sophisticated manner using location, demographics, or type of hardware being used to connect.
- Basing the price at the time of the purchase is a relatively common dynamic pricing strategy.
- Examples include lower prices at the end of a quota period so sales can make their target, cruise ships with last-minute deals and concert and sporting event prices shifting by purchase time.
- While this is difficult to do when a physical item is being purchased, there are times when it is a solid strategy.
- For example, software usage is often priced by a value metric like the number of users, the number of views, or the amount of storage.
- Airlines segment customers by the amount they are willing to pay for comfort and service during a flight.
- Selling produce is an easily understood example of pricing by demand.
- When grown in the summer with free water and light on large tracts of land, it costs less to grow, and the savings are passed on the customer to boost demand for a seasonal product.
- In winter months, the same produce is grown in greenhouses with limited space and a cost for water and light. The price is adjusted upward.
TRENDS IN COMMERCIAL REAL ESTATE
Technology trends in commercial real estate include various types of software, collection of data through IoT and data analytics.
- A recent report published by Deloitte stated that real estate is no longer about "location, location, location." It has evolved into a new refrain which Deloitte has termed "location, experience, analytics."
- Property technology platforms are seeing a rapid evolution in functionality. The platforms are expected to evolve to remove the friction of separate solutions and to integrate functions into a single solution. This evolution will give property owners and brokers a single solution to manage transactions.
- Other platforms are emerging for investment firms to raise and manage capital for commercial real estate projects. These platforms often consist of a customer relationship management base and various relevant productivity tools integrated into a single solution.
- Companies are using cognitive technology solutions to build scalable and flexible lease administration solutions. Blockchain is being used to create smart contracts that will eliminate the need for escrow companies and banks. This technology is still in the testing phase but, given the successful proliferation of blockchain in other areas, the early adopters will likely be seen in the next 1-3 years.
- In the meantime, secure sites like Docusign and regulated financial sites like Crowdstreet are making lease administration more streamlined.
- Not only Smart Homes but Smart Offices are becoming ubiquitous. Commercial buildings are equipped with sensors scattered throughout the building which utilize Machine Learning to improve the tenant experience. "Controllers can learn what areas get the most foot traffic and when," and adjust lighting accordingly. Learning when an executive arrives at their office, they can adjust the light and temperature to their favorite settings. Sensors can even detect the number of people in a room and account for breathing and body heat to regulate the temperature in a room.
- In a recent Deloitte survey, "40% of respondents are already gathering IoT sensor data, and of that 40%, they are using it primarily to generate insights for decision-making (75%), sharing insights with tenants (54%) and sharing with investors (50%)."
- The Deloitte data also found that for tenant experience and related technology investments, "64% of executives surveyed said they increased their investments over the past 18 months. And, 78% of respondents expect their organizations to at least hold or increase these commitments over the next 18 months. "
- Using data analytics, Amazon knows what products to recommend, and Netflix knows what movies you like. Similarly, commercial real estate investors and developers will stop paying expensive analysts to extract data from buried reports and will access it themselves. "Cities, counties, and states publish reams of data online for easy public access, including employment data, migration data, demographics, and other statistics very relevant to commercial real estate investing."
- Data analytics is being used to save energy, ensure safety, and make data-driven investment decisions.
MARKETING TO SENIOR CITIZENS
There are two terms used in generational marketing to describe those older than millennials. The Baby Boomer generation refers to those born between 1946 and 1964. The Silent Generation refers to those born between 1925 and 1945.
- When Pew Research surveyed adults to find out what made their generation unique, Baby Boomers' top five impacts were listed as a strong work ethic, respectful, live by their values/morals, and smarter than other generations. The Silent Generation registered their most significant impact as the Depression and WWII, and believe they are more intelligent, honest, have a strong work ethic, and live by their values and morals.
- Advice for marketing to Boomers includes taking advantage of brand loyalty, go for the upsell, and tie-in cash backs.
- What marketers should not do with this generation is to use traditional marketing and sales tactics. While they want to talk to a real person, don't call during dinner. Marketing tactics that intrude on their personal space are not welcome, but traditional TV and newspaper ads are considered acceptable. They are also least likely to make a purchase on their smartphones.
- Boomers are more likely to be inclined to splurge on themselves in their retirement, so offering discounts is not usually a successful strategy.
- When they use technology, boomers like videos that express emotions that they can understand. They especially relate to a video which "debunks the myths about growing old."
- The Silent Generation is often technologically challenged, remained loyal to a single employer throughout their career, used traditional methods, and respects authority and patriotism. Most were married, and women were likely not to have worked outside the home.
- Most have a "pay cash or save" perspective. Marketing to this group involves earning their trust, as well as providing them with value.
- They prefer to be reached with written communication, such as direct mail. These physical items should have visuals that convey a sense of family or belonging, have simple layouts and large clear fonts. A more formal communication style with straightforward information is more likely to succeed.
- If planning on meeting them in person, it is recommended that they are met in the lobby and escorted, that all locations be handicap-accessible, including wheelchair accessible tables. Because some clients may have hearing disabilities, eliminating extraneous noise is helpful to the client.
Research Strategy for Generational Marketing
In looking for trends in marketing to those generations before millennials, we searched in marketing research reports, marketing press, and academic research. We found no information on trends.
We found that the over-50 demographic accounts for 50% of all consumer expenditures, but most marketers only spend 10% of their budgets on them. This fact could explain why there is no trend information.
We did find information on how to market to Baby Boomer and the Silent Generation and have included those suggestions as helpful findings.