Halfords introduces dynamic pricing in garages

Motor retailer Halfords has introduced dynamic pricing in its services business to drive profitability by directing demand to its under-utilised autocentres.

Retailer Halfords has introduced dynamic pricing across its MOT and tyre services to deliver stronger margins and drive utilisation of all its garages.

Dynamic pricing means prices can fluctuate based on demand level. It is common in the travel sector, where airlines and hotels may put prices up if there is lots of demand for a particular date.

Halfords is a motor and cycling retailer, which also has autocentres that provide vehicle servicing. It has introduced dynamic pricing in some of those services over the past year, mainly across its tyres and MOT services.

The aim of the dynamic pricing strategy, Halfords said in a results call today (29 November), is to drive demand to under-utilised garages. In the first half of its financial year, the utilisation of the business’s autocentres improved by 7% versus the same period last year, it said.

The initiative is also helping to drive higher margins on revenue generated from booking slot fees and improved autocentre’s margin per each working hour for its staff.

Earlier this year, pub chain Stonegate Group, which owns brands including Slug and Lettuce, introduced dynamic pricing in some of its pubs, meaning drinks became more expensive at the busiest times.

Dynamic pricing is a marketing masterstroke – if you can sell it

The drive to make Halfords’ estate of autocentres more profitable through dynamic pricing is part of a wider push by the brand to drive profitable market share growth across its company.

In the company’s results, CEO Graham Stapleton claimed that the company was making market share gains above, or in line with, its own expectations.

Recruiting new customers is crucial for any brand looking to grow market share and Halfords said it has been leveraging price and some promotional levers to attract these.

While loyalty schemes are more commonly associated with retailers retaining or driving more frequent purchases from existing consumers, Halfords reported that 40% of new members of its loyalty programme this year are completely new to the brand.

The Motoring Loyalty Club is also driving business for Halfords’ MOT business, with loyalty scheme members accounting for 40% of the MOTs carried out by the company this year.

Halfords: Loyalty scheme is driving more profitable transactions

The loyalty scheme now has almost three million members, over 80% of whom have never used Halfords for an MOT, giving the business significant room to grow in the area. The loyalty club has two tiers: one that is free to join and a paid tired.

Nearly 200,000 people are part of the premium tier, which is the highest ratio of paying to non-paying members to date. In this half the company introduced the ability for customers to sign up to the premium tier in-store at tills, something that has supported this growth.

The retailer noted that it made “efficiencies” in marketing spend this half; however, it invested significantly in the loyalty scheme as well as its website. It spent £5m on IT and infrastructure in the half, which “mainly” was invested into its loyalty and ecommerce capabilities.