Tesloop Request for Feature 1 (Demand Side Pricing)
DSP
Demand Side Pricing exists in several industries. We can think of the quintessential examples in airlines and hotels.
Airlines change their prices based on several factors: number of days before takeoff, how quickly the flight is being filled up, popularity of route, day of the week, etc. Here is a chart of an LAX to JFK flight and how much the price fluctuates.
Hotels have the same thing. Their prices change as rooms fill up, in order to maximize income. The reason why it’s maximize income and not revenue is because hotels have fixed expenses. As we wrote about here:
a hotel would rather sell a hotel room at a discount than have it completely vacant because nearly all of the hotel’s costs are fixed (electricity, maid’s salaries, etc.).
The main difference between a flight and a night at a hotel is that a flight can be cancelled if it doesn’t have enough passangers and it wont have to waste a route on a partially filled plane. On the other hand, hotels cannot pause their fixed costs.
How this applies to Tesloop
Looking at 3 Wednesdays in July ’18, going from Santa Monica to San Diego, the pricing for seats is the same: $59 per seat on the first ride, $54 for the next, $49 for the third, $54 for the fourth, and $29 for the last.
Tesloop falls into the category with hotels, not airlines, as it cannot cancel trips if it has only 1 passanger signed up. Therefore it makes sense for Tesloop to enable Demand Side Pricing. By looking at several signals such: how many seats have been sold, day of week, seasonality, local events, route search volume and past data, Tesloop can optimize it’s yield and always have a full car.
Prices will always start with what they were supposed to be and go down as it gets closer to full occupancy. It would be a shame for a ride to have any empty seats as every single passenger is an interesting story and a potential evangelist for the company.
This in turn will allow Tesloop to grow it’s fleet quicker, expand it’s routes, and satisfy more of it’s customers.
How would Citadines Group help Tesloop in creating a DSP Platform
- Collecting the baseline info. We can see in the code that Tesloop is collecting some sort of Analytics. We would have to create cohorts to be able to answer a few questions:
a) How many visits to the site does it take to book a trip?
b) Do visitors come to browse the site for prices and then make up their mind to go or do they have an existing trip they need transportation for.
c) Are visitors comparing the price of a trip with other forms of transportation?
2. Test. Based on the hypotheses above, we can setup tests to prove out the questions above.
One test is to choose a subset of users which are continuously visiting the site to check on a price/how many seats are left and offer them a 50% off coupon. Based on results of that test, we would be able to know how important price is in their decisions.
Other experiments is to setup cart abandonment emails to understand why people start booking a trip and stop.
All in all, there are a lot of interesting ways for Tesloop to increase it’s number of riders and grow their fleet as quickly as they want.
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