Air Travel Pricing by the Pound - Some Lessons
Samoa Air recently announced that they will begin charging for airline tickets by the pound. When you first heard about this, you probably had an emotional reaction, either pro or con. Undoubtedly the average weight of the people who support this is much lower than the average weight of the people who oppose the idea. One young lady this past week said to me, "This is fair because right now I can't afford to fly anywhere with my children." Hence, the first lesson from this incident. 1. Change is fair when it's to our advantage. What would that young lady think if we put a surcharge on screaming babies in airplanes? She would think it unfair, but the business travelers of the world would rejoice. The second lesson to learn is based on the justification. After all, airplanes run on weight. The heavier the load the more fuel is required. Airlines charge for overweight bags. Doesn't it just make sense to charge by the pound? 2. Consumers think using a cost-plus mentality. If it costs more to serve a heavy person then it's reasonable to charge them more. Of course as pricing people we do not price using cost plus. We price based on willingness to pay. However, we can often influence willingness to pay using cost plus arguments. Lesson three is huge kudos to Samoa Air for creativity and thinking outside the box. Airlines have always priced by the seat. To some extent they also price by the mile. Samoa Air is doing something different. 3. What do you charge for? Just because your industry has always charged one way doesn't mean that's what you have to do. If you want to be different, you have to be different. (Profound.) It may make sense to be different in your pricing. The first 3 lessons all tend to support pricing by the pound. The fourth, not so much. The implementation is to have people declare their weight when they purchase the ticket and verify it by weighing each passenger when they are at the airport. 4. Complexity reduces likelihood to purchase. Making products easy to purchase helps them sell. When we add complexity in our pricing schemas, customers will tend to buy from providers where it's easier. Of course if you're skinny and you think you will get a much better price, then you're more willing to put up with the added complexity. Many of us may not. It's impossible to know if this will stand or get reversed. But the fun part is we can learn from the situation. Let's watch to see what happens Mark Stiving, Ph.D. – Pricing Expert, Speaker, Author Sign up for the Pricing Perspective, a free monthly summary of my blogs and other publications. Photos courtesy of LessWorkMoreLurk.com and foilman.
Looking for the latest in product and data science? Get our articles, webinars and podcasts.