That is the question that needs to be answered when you are developing your pricing strategy: Do you add on ancillary charges to your rental fees or do you bundle it in with your base price?
I heard an interesting story on NPR recently about a business that tried both strategies. StubHub, an online ticket reseller, opted for an “all-in” pricing structure for their tickets for the last couple of years. The price on their web page included all of the fees in one lump price, which was different from most of their competition who listed the base price of the ticket and then added ancillary fees when the customer paid.
However, StubHub recently abandoned this bundled pricing strategy. They are going back to listing lower ticket prices and adding 15% to 17% of fees on top of the base rate at checkout. The reason for this seems to be that bundled pricing was a failure and hurt sales. The company tested the two strategies head-to-head by dividing their customers into two groups to see which pricing strategy resulted in more sales. The customers that were presented the lower base price plus additional fees had substantially higher sales.
Those results are not that surprising when you consider people tend to compare base price when shopping for an item. The assumption may be that those add-on fee (taxes, shipping, handling, etc.) are likely to be relative between sellers and perhaps non controllable.
So to bundle or not to bundle? That is the question all equipment rental companies must determine for themselves. If your customers are price shoppers you might be best pricing at the market rate like your competitors and changing ancillary fees on top. Or if they are not price conscious a bundled price might make them happier.
What pricing strategy does your rental business use? Please comment below.
Author: Kathy Panzl, Director of Marketing