Real-Life Research 10.1 Affiliated Parking Systems Looks to New Pricing Approach Bill Wright is the Chief Marketing Offi

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Real Life Research 10 1 Affiliated Parking Systems Looks To New Pricing Approach Bill Wright Is The Chief Marketing Offi 1 (220.45 KiB) Viewed 92 times

Real-Life Research 10.1 Affiliated Parking Systems Looks to New Pricing Approach Bill Wright is the Chief Marketing Officer (CMO) for Affiliated Parking Systems (APS). It's an old school business that has been around, in some form, since humans started using other forms of transpor- tation besides their own feet. APS is a family owned business that has been in business for over 80 years. APS owns and operates over 300 parking lots with slightly over 33,000 parking places, primarily in major urban areas with over two-thirds of their lots in the top 10 Metropolitan areas of the United States. Bill has been working for the company for almost 20 years, starting right out of college. It is certainly not a glamorous business, but it has been a good one for APS. Bill has been struggling, searching for new ideas to increase revenues from existing lots. They have run out of opportuni- ties for growth through acquisition, a major engine of growth for the company for decades, having acquired many of the best locations in the country. In addition, Bill has been studying various trends in the country and sees some developments that are negative for the future of the parking lot industry in general and APS in particular: • Trends in car ownership are headed downward which is already evidenced to a small degree. In particular, younger people, based on environmental concerns, lifestyle issues, more interest in living closer to work rather than in suburbia, · comfort with ride hailing services like Uber and Lyft, are less interested in car ownership than their parents. • Increases in people working from home, virtual offices, working online in general, are not positive for the future of the industry, Bill has been reading about surge or dynamic pricing where pricing for a product or service is based on the level of demand for that product or service in real time. He has researched the concept, talked to people who are using it and seeing how it is being used to price express lane usage on freeways (why do we park on a driveway and drive on a parkway)? He is wondering whether this approach to pricing would help APS increase revenues and profits. Historically the industry has charged a price per hour or day, possibly varying the level by weekday, weekend and dayparts during the week. He knows, based on studies that he has commis sioned, that demand during certain parts of the day is relatively in lastic (increase prices and increase total revenues) while demand at night and on weekends is much more elastic (decrease prices and increase revenue). Note that this is a business with very high fixed costs around the ownership and maintenance of the properties with a small variable cost. Many lots have no attendant and use some form of electronic or manual system to collect parking fees. Some have a single or limited number of attendants to collect fees. His research has led him to focus on two things. First, he is interested in doing all fee collection from totally electronically to further reduce variable costs. Second, he wants to vary pricing based on the level of demand for parking in real time. In his research on surge pricing, he has discovered the literature on artificial intel- ligence. This is something new to him. He has certainly read about it from a high level in the media and has seen how it is portrayed in science fiction films, but it is not something that he studied in school or has had exposure to in his business career. He has come to the conclusion that he is going to have to use some type of artificial intelligence system to drive the kind of automated dynamic pricing system that he is envisioning for the company. 1. Would you say that Bill is on the right track regarding the i need for artificial intelligence to implement dynamic prica ing? Why do you say that? 2. If he were to pursue the idea further (he obviously would need help from a consulting firm), what data would be needed to implement surge or dynamic pricing? 3. Would models be needed? What would the models do? How 4. Describe the ultimate system that would be needed in terms of inputs needed, how those inputs would be captured models needed (just a general sense of what the models would need to do), how pricing would be communicated to perspective users and how fees would be collected. Mapping it all out in a diagram with a few comments on what is occur ring at each step is probably a good approach to answering might they be developed? this question.