Contemporary Marketing 16th Edition by Louis Boone,David Kurtz

Exercise 25

It's hard to find a real bargain these days, but BoltBus is the real deal. Those black-andorange buses you see trundling past you on the highway or along a city street could be your ticket to ride-for $1. BoltBus, owned by Greyhound Lines, operates buses along the Northeastern corridor, in California, and in the Pacific Northwest, moving more than 2 million passengers each year. The company's primary customers are those in the 18- to 34-year-old range-college students, recent grads, young professionals, and young families. These riders tend to be budget-minded, and BoltBus caters to them. Pricing is a major component of the bus line's marketing strategy.
When BoltBus launched its line in the Northeast, at least 15 other competitors already operated in the region. In addition, travelers could opt for planes or trains, or they drive their own cars. So the bus line had to offer a brand that sold tickets online, at a very competitive cost. "Pricing is really crucial because it's such a competitive environment," says William Koen, a business analyst for BoltBus. With so many other options available to consumers, BoltBus opted for penetration pricing-including its now-famous $1 ticket-relying on the buzz generated by travelers who nabbed the golden ticket as well as those who began to ride the bus line for its average $20 fare. Typically, BoltBus will sell one $1 ticket per route, selling the remainder of seats for around $20. Whoever gets the $1 ticket often posts their lucky draw on Facebook or Twitter-and the news goes viral. "The $1 ticket is meant to be fun," explains Nicole Recker, senior marketing manager, and the strategy seems to work. Everyone hopes to be the $1 ticket holder, but no one minds paying the regular fare, which is significantly lower than those of competing bus lines.
BoltBus does have to monitor its costs, particularly those of fuel and labor. When these two factors have risen, the company has increased prices in small increments to keep up, with the goal of maintaining both value and profitability. The company also continuously monitors the competition to make sure its service is priced less than its rivals while meeting its costs. BoltBus takes into account the price of gasoline, tolls, and parking for those consumers who choose to drive-and tries to offer a cheaper, more convenient service. "Generally in New York City you'll pay more in parking per day than for a one-way ticket on our buses, so having that value for our customers has driven our explosive growth," notes Koen. "It's opening up an entire new market for the bus industry."
BoltBus also takes demand into consideration when setting prices. Using historical data, marketers see how many people its buses have carried along a certain route on any given day or time period. Then they tweak certain variables-such as the frequency of runs-to maximize revenue and profitability without cutting value to customers. For example, ridership tends to increase during the weekends and holiday periods, so BoltBus offers more runs during those high-volume periods, while cutting runs during the midweek when the buses aren't filled. During low-demand periods (such as Wednesdays), BoltBus may offer a lower price to attract more volume; conversely, during high-demand periods (such as Friday evenings), ticket prices are a bit higher. This type of pricing to demand is similar to the strategy of hotels and airlines; consumers pay more to fly or stay in a hotel during popular vacation weeks. Since seats generally sell out during these high-volume periods, BoltBus doesn't need to discount the ticket price. But an empty seat represents a loss of revenue to the company, so a discounted sale is better than no sale-which is why BoltBus offers lower prices during quieter times of the week or year. "It's a high-volume business model," explains general manager David Hall. "We keep the price low and the volume high."
BoltBus' pricing policy is attractive to consumers. Prices are straightforward and easy to understand; consumers know what to expect and what they are getting for their dollar. "Transparency has been key to our success," says Recker. "It's done a lot to enhance our brand." BoltBus charges no hidden or additional fees and doesn't jack up its prices without warning. "We're very honest with our customer," says Recker.
Questions For Critical Thinking
1. How does BoltBus use a combination of penetration pricing and everyday low pricing (EDLP) to achieve its objectives?
2. BoltBus is well known for its $1 ticket sales promotion. Though it has been successful thus far, could it ever backfire? If so, how?