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Longer Rental Booking, Lower Per Unit Pricing – More Revenue

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Optimizing Rental Pricing for Maximum Utilization

When setting up a rental business, a common pitfall is applying linear pricing to longer durations. If a single day costs $100, charging $700 for a week often discourages longer bookings. To scale a circular business effectively, pricing strategies must evolve to incentivize inventory utilization.

The Power of Duration-Based Discounts

Strategic pricing involves offering automated discounts for additional days or weeks. This approach serves two main purposes:

  1. Increases Average Order Value: It encourages customers to commit to longer rental periods.
  2. Maximizes Inventory Efficiency: The fundamental rule of thumb in rentals is that inventory only generates revenue when it is out with the customer. Stock sitting on shelves is a liability.

Facilitating the "Just in Case" Buffer

By adjusting the pricing curve, you can encourage customers to book an extra day "just in case." This not only secures additional revenue but also provides a better customer experience by reducing the stress of strict return deadlines. Using a robust Recommerce OS – such as TWICE Commerce – allows merchants to automate these complex pricing structures easily, ensuring that stock keeps moving and earning.

Clip from The Anatomy of the Perfect Rental Business podcast episode.

Tuomo: If someone books for example seven days compared to one day, if your one day price is 100 bucks, your seven days probably shouldn't be 700 bucks. You probably want to give a somewhat of an automated discount on additional days or weeks to encourage customers to book a longer period.

Because then as a rule of thumb, every time your stock is out with the customers, it's out there earning. And every time it's in in your stock, it's not earning. You kind of want to encourage customers to maybe book one day extra just in case. And you can facilitate that with pricing.