The Dynamics of Parking

Dear Friends,

We’re getting closer to resuming the Game Changer roadshow, with several events lined up for the next few weeks in Europe and the United States.

April 9th: John Pineda will deliver the keynote address “Changing the Game for Climate” at the annual summit of Pricing for the Planet in Paris. John contributed to two chapters on sustainability in the Game Changer book.

April 11th: Nicolas Manuelli will speak on fairness and building sustainable and equitable pricing models at the EPP Manufacturing Pricing Forum in Barcelona.

April 17th: I will deliver a keynote address at Ardensi’s 6th annual Auto IP & Legal World Summit in Munich. The topic is the Unified Theory of Pricing. I will also conduct a roundtable discussion later in the day.

April 25th: My co-author Arnab Sinha will speak on the topic of pricing fairness at the annual spring conference of the Professional Pricing Society in Chicago. John Pineda will also hold a breakout session called “Monetizing the Green Premium Market Opportunity.”

In case you missed them, here are some posts since last week’s newsletter.

Where does the pricing function report?: Citing data from the Professional Pricing Society, Stephan Liozu shared a chart which shows the various functions that pricing reports to. The highlight for me is the growing share of pricing functions that report to business units or product management, which are the functions closest to the market. You can see the full post here.

The importance of introverts: The segment of consumers who indulge less and spend more time online is growing so fast that companies in many industries may need to change their strategies to attract them. You can read the full post here.

Lessons from Fortnite: Epic Games shows how to use pricing models – not price points – to differentiate a company across segments. You can read the full post here.

How CMOs are transforming the marketing function: Several of my colleagues describe the ways that CMOs are rising to the challenge of adapting their departments for today’s world. You can read the full post here.

Academia refocuses on AI: Academic research helped form the technological backbone of artificial intelligence. Can it now help build AI’s conscience? You can read the full post here.

The rise of “Uber-style” pricing has become a popular topic over the last few months. That expression is usually code for the kind of dynamic pricing that frustrates customers, who feel that prices change randomly and go up far more often than they go down. One sector, however, seems ideal for a type of dynamic pricing that could appeal to customers and may even create social benefits. In this week’s guest contribution, our colleague Ricard Vila looks at the potential for dynamic pricing in the parking sector.

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The Dynamics of Parking

Parking facility operators have traditionally played the Uniform Game, which makes sense given their market characteristics. Their opportunities for differentiation – location, cleanliness, ease of payment – provide only slight advantages. The market is fragmented on the supplier side, while the purchasers of parking services have broadly similar needs.

Traditionally, operators have set a fixed price for a timeframe such as an hour, day, or week. Optimization is achieved through variable pricing, which means that operators set different fixed prices for peak and off-peak periods, extended hours, or special events. Sports teams used variable pricing as a precursor to dynamic pricing, when they differentiated ticket prices by quality of opponent or day of the week, using their experience and analysis of historical data to set prices in advance.

Parking, however, seems like an ideal market for the Dynamic Game. A parking space is a perishable good whose demand can fluctuate within an hour, depending on weather, traffic flows, unexpected popularity of events, and other factors. Hybrid work can also cause large fluctuations in demand for parking in urban centers, as employees work in the office fewer than five days a week.

Several US cities have run pilot programs to test the viability of dynamic pricing for parking, not only as a way to optimize revenue, but also as a way to reduce the social burden that parking imposes. This report from the city of Philadelphia said that pilot programs in other cities reduced the amount of time parkers “cruised” the lots and streets in search of a free space and also reduced double parking. This resulted in lower carbon emissions and less frustration. When San Francisco piloted "demand-responsive parking" in 2017, it noted two additional benefits: local businesses saw higher revenues, while average parking fees declined by 4% for street parking and 12% for garage parking. The city implemented the program, and between September 2022 and September 2023, the city’s parking meters generated $51.7 million in revenue, according to one report.

The advent of apps such as SpotHero and ParkWhiz have introduced real-time dynamic pricing to the parking industry. These apps aggregate demand across multiple partners and generally help users find lower-priced or hard-to-find parking locations. SpotHero began rolling out its dynamic pricing model in 2020 and now helps consumers save on parking rates at places such as hotels, which have recently increased parking fees as a way to generate more revenue.

Implementing dynamic pricing for parking, however, poses the same challenges that other industries face. Companies need access to reliable real-time flows of data, including third-party data such as weather. They need the IT infrastructure and engines to process the data and generate price recommendations. They also need to understand their communication challenges, as Wendy's encountered when it recently announced its plans to launch dynamic pricing.

As always, please continue to share your thoughts and questions with us. If you haven’t ordered your copy of Game Changer yet, you can do that HERE. Thanks for your interest and support!