Creating a profitable karting track always has a few important ingredients:
- You need to offer a very good karting experience,
- Have a great customer service,
- Have an excellent financial understanding of your business.
The most important tool that determines your profit, given that point 1 and 2 are fulfilled, is your price strategy and the way you nudge your customers! Learning how to master this tool is extremely important. In this blog, I will try to give you some insights about how you can improve this. But it is important to understand that there is no universal good price strategy. It depends on the region you’re in, the competition you have, the “as is situation”, …
Step 1: Analyze the “as is situation”
Start by splitting up your customers in a few groups: companies, groups of friends, individuals, families, etc. What are the products you sell to each group for the moment and what is your revenue per product?
- 60% buy 1 session of 14 min at 20 EUR
- 40% buy 2 sessions of 14 min at a total of 38 EUR
Your average revenue for this group is 27 EUR
Step 2: Take a step back
I want to challenge you to take a step back and forget, for just a moment, the “as is situation.”
- Determine what every type of customers group would spend for your experience. For this you need to look at the price/min your competition is charging and whether your experience better or not. How is the supply/demand ratio in your region? Can you ask more than them or not?
- After that you need to determine the time on track you think would be optimal for the average customer of each group. You can increase those minutes by making a less exhausting track! Again, the importance of a good track layout! Do not think about how full or empty your track is.
- Individuals should be spending at least 1,50 EUR/min in the region for the offered product
- The ideal time on track varies between 20 and 40min/person with breaks. Let us take the average of 30min for this example.
Now you have roughly determined what you want this customer to spend. 1,50 EUR x 30 min = 45 EUR.
Step 3: Determine your goal
Now you know what the optimal product for every type of customer is. This is the moment where you consider some external factors.
- Running 14 min sessions every 15 minutes always causes delays. This could be solved by using 12min sessions.
- Going up to a price point of 45 EUR could be too high for some?
- Never decrease your price/person
After full analyses you choose to do following:
- Have 10% of drivers race 1 x 12 min
- Have 60% of drivers race 2 x 12 min at 38 EUR
- Have 30% of drivers race 3 x 12 min
Step 4: Create the optimal price strategy
Be aware that it might take several months/years to get to a point where everything is implemented as you wish. But in this step, you need to determine the optimal strategy to reach your end goal.
Here are some tips & tricks that can help you determine your strategy
- Your base price should be the price you would want to receive in peak time. A price increase for a holiday period gives negative feelings. Running a discount whenever you have a quieter period in the week or year, always gives positive feelings.
- Because karting attracts different types of customers, it’s important to find an easy way to do it right for all of them. A family with 3 kids does not have the same budget as a profitable company wanting to thank their team members. You do not want to fix your price to the group with the lowest budget for all groups.
- Give them 3, maximum 4 choices:
- The entry product, you do not really want to sell. It has the lowest price but has to be the product that has the lowest price-value ratio.
- The 1 or 2 products you want to sell to most of your customers.
- A product that is more expensive, so your customers do not have the impression they chose the most expensive option.
- Last but not least: Keep it stupid simple. Make it clear for everyone.
- One session of 12 min = 22 EUR (10%)
- Add 16 EUR for a 2nd session = 38 EUR (60%)
- Add 14 EUR for a 3rd session = 52 EUR (25%)
- Add 12 EUR for a 4th session = 64 EUR (5%)
If we reach this goal, the average spent will be lift until 41,2 EUR/driver or +53%!!!
On Monday evening you can have a promo: Drive 4 session for the price of 3! Everyone that enters will still spend 52 EUR, which is still more than the average 41,2 EUR you would like to receive.
Step 5: Determine the steps to reach your new goal
Old habits die hard. You can better make a few small changes every 6 months than changing it all at once. Do not implement more than one new discount or formula per year.
- You can start by keeping the prices, but going from 14 to 12 min
- Make the price of the first session more expensive but keep the same price for the double session.
- Add a new discount to maximize revenue on the quieter moments.
- Increase all prices, keep up with inflation.
Step 6: Nudge your customers
This is a highly important step! Maybe you have all the above right, but you just missed this step? Taking your time to nudge better can make a big difference.
Do everything you can to make sure your customers choose to drive 2 or 3 sessions, since that is your goal. Change the color, add a label “most popular”, etc.
Reservations trough phone or mail
Make sure the team members that takes in reservations are trained to sell the 2 or 3 sessions.
- Do not ask the question: Do you want to drive 1 or 2 sessions?
- Ask instead: When do you want to drive the 2nd time
- Train them to say things like: Oh, you only want to drive once?
You will see that after a certain time, everybody will drive 2 or 3 times and that the above nudging will be done naturally.
You should have also noticed the importance of having an adrenaline filled, non-exhausting track and karts. People will visit you more often and drive longer. Those are important growth accelerators!
Optimizing your revenue on quieter moments is also an important part of success. And what about extras like memberships, head socks, etc.
If you are interested in one of these subjects, please let me know. Let me know if you like this content, but also if you do not like it.
Your partner for a successful karting track,