The Price is Right
How we used host feedback to build personalized pricing tools
Last November we launched Smart Pricing, a tool to help hosts set the right price every day, automatically. As with any marketplace, demand on Airbnb changes over time and prices vary based on season and local events. Smart Pricing is a tool that was inspired by feedback from our host community. A multidisciplinary team of product managers, designers, engineers, data scientists, and researchers worked together over six months, relying on feedback from hosts throughout the product cycle — from identifying what type of pricing tool hosts needed, to gathering early input on design concepts, and then fine tuning usability.
Finding the Right Price
We learned that for many hosts, finding the right price for their space can be both time-consuming and challenging. Not only is each space unique, but there’s also no easy way to measure shifts in the market. Even many experienced hosts told us that they find pricing difficult, especially as seasons change, special events come to town, and more listings emerge in their neighborhood. Finding the right price isn’t just a matter of making a quick change, but often requires a lot of tinkering and adjustment.
We also observed that pricing can be stressful, as some hosts never feel completely confident in their listing’s price: Is their listing over-priced and therefore lowering the likelihood of bookings? Or, is it priced too low and impacting overall earning potential? Given how quickly demand shifts, we’ve found that it’s not uncommon for hosts to feel that their space is both under and over priced at different points in their tenure.
Understand Pricing Challenges
Before we embarked on building Smart Pricing, we conducted one-on-one interviews with a diverse set of hosts to understand their primary challenges and concerns around pricing. We focused on two types of hosts: those who rely on their Airbnb earnings to make ends meet, and those who view their earnings as supplemental income. We interviewed hosts from these two groups because we hypothesized that pricing needs differed depending on how hosts use their Airbnb earnings and how often they want to share their space.
These interviews revealed an important and consistent finding regardless of a host’s financial motivations for hosting: pricing is personal. Each host and listing is unique, and that’s why hosts need to be able to personalize their Airbnb pricing tool.
Listening to hosts
During research, it was important that hosts could talk openly and honestly about pricing and their financial goals. It’s safe to say that most people don’t naturally feel comfortable talking about money with strangers, and this research was no exception.
We started by creating an environment where hosts felt comfortable, and acknowledged early on that talking about money is personal, which decreased the size of the elephant in the room. We also spent extra time building trust and getting to know our hosts individually by having them share why they started hosting. Sharing their personal hosting journey helped put them at ease, and provided a natural segue into deeper conversations about goals and financial needs.
Designing for Personalization and Control
After interviewing individual hosts, we surveyed thousands more from around the world to see if our findings were generalizable to our larger host community. The survey data confirmed that personalization and control are two key features that many hosts wanted in a pricing tool. The price of each Airbnb represents the host and the experiences each space offers — Some hosts take pride in offering guests affordable and unique experiences on a budget, while others provide one-of-a-kind luxury experiences. To build an effective pricing tool, we needed to enable hosts to represent this diversity.
With these findings in mind, we added settings to Smart Pricing that allow hosts to specify minimums and maximums, as well as how often they want to host. These settings enable hosts to personalize pricing to match their goals. In addition to market factors like supply and demand, the Smart Pricing model also considers what’s unique about a space when adjusting prices, such as page views and previous bookings.
The team working on Smart Pricing leveraged these insights as they dove deeper into their work. Designers focused on creating a pricing tool that felt personal, effortless, and streamlined. Data scientists and engineers built a Machine Learning (ML) model to guide daily prices for Smart Pricing. Given that features in a ML model interact in complex ways, they built a tool that enabled interpretation and understanding of specific model features. You can read more about this tool and their model development process here.
Refining Smart Pricing Through Feedback
As the product development cycle iterated, the research team worked closely with designers and engineers to gather more input on Smart Pricing from hosts. We started by testing low-fidelity prototypes and gathering feedback on a few early design concepts. Several rounds of testing later, hosts were able to test-drive a fully functional Smart Pricing tool that used their own data to recommend personalized prices.
Listening Leads to Action
Smart Pricing is just one example of how listening to our hosts shaped the development and design of a new Airbnb product. At Airbnb, an entire team of researchers on the Experience Research team work to understand and incorporate feedback from both hosts and guests into the different product decisions we make. This feedback helps us make user-centered decisions, and build tools and features that help our community.