pcAmerica Newsletter #377 August 17, 2010

 

 

 

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Demand-Based Pricing For Your Retail Store or Restaurant?

New Credit Card Laws May Not Be Good For Retailers

Dell Streak On Sale Now

Contacting pcAmerica

 


 

  • Demand-Based Pricing For Your Store or Restaurant

I'm not actually suggesting that you do this, but you may want to think about it.

 

San Francisco has rolled out new smart parking meters. Those who need a parking space pay anywhere from 25 cents to $6.00 per hour for parking depending on how many parking spaces are available in the area. The meters are all attached to a computer which determines the current demand for parking and establishes the current meter charge. The meters take credit cards and automatically post and charge you the current rate.

 

Airlines are well known for demand-based pricing. At any given time, the cost of the seats that you are purchasing varies according to the number of seats still available and the number of days you are making your purchase prior to your flight. You may be paying $100 per seat for a flight that you book three months in advance. Someone purchasing a ticket a week before the flight may have to pay $300 if few tickets are left. On the other hand, that person may pay $75 if lots of seats are still available.

 

Buying a ticket doesn't necessarily mean that you will get a seat because airlines sell more tickets than they have seats. Airlines expect that 10 to 15% of ticket holders won't show  up. If you don't show up, you probably won't get a refund. If you do show up and the flight is overbooked, you may be given an incentive to take the next available flight out.

 

Airlines also charge different prices for tickets depending on the time of day. You may be paying one price for a ticket if you call or place an internet order at 3 AM. You may pay another price for a ticket if you make your purchase at 1 PM.

 

Hotels are now widely using demand-based pricing. Just like the airlines, hotels change their prices depending on how many rooms are still available on a given day and how far in advance you have made your reservation.

 

Conventions or parties also help determine hotel pricing. Someone who is having a wedding may have reserved 50 rooms in a hotel at $125 per night. The hotel will freeze this price for everyone who tries to make a reservation. The hotel does not want to make a room available for a non-wedding party guest for a price lower than $125 per night. On the other hand, the hotel may decide to reduce the price of any available rooms 24 hours prior to the wedding. So, some lucky people may be able to get a room for $75 if they reserve that room on the day of the wedding.

 

Conventions normally establish hotel convention rates. Sometimes you will see a hotel post prices of $250 per night (for example) on the days that a convention is taking place in the hotel. The convention owners will make these rooms available to convention attendees at a price of $150 per night (for example). The rooms may actually cost the convention promoters $125 per night so they are making a profit. Since attendees think they are getting a bargain ($100 off the hotel price), everyone is happy.

 

Hotels have ways of getting rid of any rooms still available on the day of the convention. It's very possible that a person arriving at the convention without a reservation could actually pay $75 for the room (as long as they do not mention that they are part of the convention).

 

I've gone to a convention without a reservation. The clerk insisted that the price of a room was $150. I tried using my AAA card, my AARP card and almost everything else in my wallet. The clerk would not budge. It's $150. Finally, I took out my gym membership card. The clerk said, "Why would I give you a discount for your gym membership card?" I said, "Why not?" The clerk gave me an upgrade suite for $125. Your hotel clerk has all the power. I wore him down and made him laugh.

 

Now, how can you use demand-based pricing in your retail store or restaurant? I would guess that most retailers already use demand-based pricing. If something sells, you keep the price. If it doesn't, you put it on sale.

 

Many restaurants use demand-based pricing. You have special prices for happy hours. Your day and evening menus probably offer the same food at different prices. You may want to consider having special weekend menus. Your customers are far from being stupid though. Airlines and hotels get away with it. I'm not sure that your customers would be too happy paying more money for the same meal on Saturday night (assuming that this is your busiest time of the week). You may want to offer a special Saturday night menu that closely resembles your standard menu but can bring in an extra 10% in revenues. Perhaps that Saturday night menu includes dessert, wine, a larger cut of beef, or something special.

 

Demand-based pricing is interesting.

 

To read more about demand-based pricing go to:

 

http://en.wikipedia.org/wiki/Pricing

 

Demand-Based Pricing

 

To read more about the San Francisco parking meters go to:

 

http://www.engadget.com/2010/08/07/san-francisco-rolls-out-new-smart-parking-meters-with-demand-re/

 

San Francisco Parking Meters

 

 

  • New Credit Card Laws May Not Be Good For Retailers

When I started pcAmerica (or the early iteration of pcAmerica), we did not accept credit cards. Business was good.

 

Two years later, I went through the grueling process of getting authorized to accept credit cards. At that time (1978), it was very difficult to be authorized to accept credit cards if you did not have a store front walk-in business. Credit card companies wanted a face to face meeting with customers and have an actual credit card handed to the retailer. Over the phone and mail order transactions were frowned upon.

 

Anyhow, we got our approval from the bank and the credit card company after making a large deposit that was placed into escrow.

 

Upon accepting credit card availability, our business instantly tripled in size.

 

Under the new credit card laws, our government is taking away some of the advantages that businesses who accept credit cards have.

 

Retailers and restaurants may now offer a cash discount for those customers who do not use a credit card. Many retailers will start offering 2, 3, 5 or 10% discounts to those customers who choose to pay by cash. Previously, under most credit card agreements, retailers and restaurants were not able to offer cash discounts.

 

What does this mean to you?

 

Maybe your store is not going to offer a cash discount. However, if a competitive retailer offers such a cash discount, that may force your business to match that discount.

 

Many customers will begin to insist on a cash discount. If you don't offer a cash discount, your customer may shop elsewhere.

 

Some retailers (not you), may offer larger cash discounts (like 10%). Even though a retailer may only be saving 2 or 3% on credit card fees, having cash in their hands may mean that these retailers are no longer declaring the income for taxes purposes. Yes. This is illegal. It is not your business. But, the business next door may be doing it.

 

So, let's say you keep good records in your business and pay all of your taxes, but the business down the block offers customers a 10% cash discount because they pocket the tax savings by not reporting their income. What does this do to your business?

 

As a consumer, you may think that credit cards are evil. After all, paying by credit cards makes it very easy to buy.

 

As a business owner, consumers who pay by cash take away from your income. Those consumers who walk into your store find it nice and easy to buy more knowing that they don't need the cash. They can take out their credit card and pay later. They don't have the instant punishment of seeing cash leave their pocket. They get to buy something and think about paying for it later.

 

Remove this excess credit card cash float from the economy and we are talking about a large amount of money. Offering a cash discount to customers sounds nice, but if everyone starts doing it, I envision a significant drop in economic activity and less money in the retailers pocket.

 

The bottom line is...happily accepting credit cards is a good thing for retailers. It helps grow and stimulate your business. Cash is nice, but any savings in credit card fees are likely to be lost in cash discounts and lower sales.

 

Added to the new laws is that consumers are using their credit cards less and trying to pay off their credit card debts. That's a good thing for consumers, but not necessarily good for retailers. 

 

According to a publication from the Federal Reserve of Boston, 75% of all households use credit cards.

 

The average credit card debt per household with credit card debt is $15,788.

 

Cardholders own an average of 3.4 credit cards.

 

The U.S. credit card delinquency rate is 4.27% (payments more than 60 days late).

 

Credit card purchases are down by 4%.

 

You can see more credit card statistics by going to:

 

http://www.creditcards.com/credit-card-news/credit-card-industry-facts-personal-debt-statistics-1276.php

 

Credit Card Statisics

 

  • Dell Streak On Sale Now

Dell is the first computer manufacturer out the door with a competitor to the Apple IPad.  

 

The Dell Streak is a 5 inch screen pocket device that uses the Android operating system.

 

The Android operating system was developed by Google. In simple terms, the Android operating system is similar in purpose to Windows. An operating system communicates between you the user and a device. Windows is great, however, it uses up a lot of resources. Windows is just too large for small devices because these small devices do not have the resources to run it. So, Google developed the Android operating system. Android works on small devices like tablets and cell phones.

 

The Android is not as potent as Windows and cannot run the sophisticated software that Windows is able to run. However, the Android operating system does allow you to access the internet and run thousands of applications that have been developed for the Android operating system.

 

The Dell Streak is the first IPad competitor out the door and a really great start. It allows users to access the internet anywhere in the world using the AT&T network. Or, you can use it to access the internet from any of the millions of Wi-Fi connections available or through the wireless connections available in your home or business. It comes with a built-in 5 megapixel camera for still pictures or video. Since you have an internet connection, the Streak can be used to read and write emails.

 

The 5 inch device is great for its "put in your pocket" ability. It's a little small compared to the IPad, but Dell is rumored to be coming out with a 7 inch version soon.

 

Right now, the Dell Streak will let you connect to the internet, read and write emails, and take photos and videos. The Android Operating System has thousands of applications that will allow you to play all types of games, watch TV shows and videos, use Microsoft Office compatible spreadsheets and word processors, access your bank accounts and do almost anything else you can do on a desktop.

 

The Dell Streak sells for $299 if you purchase a two year AT&T contract that gives you mobile access to the internet. The contract will cost you $15 per month for light access or $25 per month for almost unlimited internet access using the AT&T network. Or, you can purchase the Dell Streak for $550 without a contract. You can still get onto the internet using your home or business wireless access or any Wi-Fi connection available in your area. AT&T also allows you to purchase monthly access to the internet without a contract.

 

I have no doubt that point of sale applications will be available for the Android in the not too distant future. These applications will interface with your in-store point-of-sale system including credit card authorization.

 

To order today or find out more about the Dell Streak, go to :

 

http://www.dell.com/content/products/productdetails.aspx/mobile-streak?c=us&l=en&s=dhs&cs=19

 

Dell Streak

 

or...to read reviews and learn more about the Dell Streak, just search Google.

 


 

Contacting pcAmerica

 

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