Inane pricing strategies II

ABC’s World News Tonight reported that October 26th was the best day to purchase airline tickets for holiday travel.  Why?

A study of 130 million ticket purchases indicated that travelers obtained the best deals by buying roughly 60 days in advance on a Sunday.  The reporter stated that the airlines offer lower prices on Sunday “to attract travelers who are most price sensitive.”

Inane?

If I told you that:

  • You had a limited supply of merchandise
  • Your peak selling season was 60 days away
  • You had to offer your lowest price now

What would you tell me?  Hopefully, you’d invite me to take a leap off a tall building.  I’d be asking you to cater to your least loyal, least profitable customers while ignoring your most profitable customers.  I can’t envision a more inane pricing strategy.

Attracting customers

Can you imagine the time, effort and energy that went into evaluating 130 million ticket sales?  For what purpose?  To discover who your ‘most price-sensitive’ customers are?  To find ways to cater to their needs, when price is all that they care about?

Let’s reframe those questions.  Why wouldn’t you invest your resources to find ways to attract your least price-sensitive customers?  For what purpose?  To discover what they value and how to enhance that value?  To tout that value in marketing messages so that you can reap the rewards of premium prices?  Any of these would be legitimate reasons for the research.

ROI

The latter set of questions afford some potential return on investment for the effort.  The former, not so much.  Indeed, efforts to attract the most price-sensitive customers can produce a negative ROI in the form of lost revenues and profits.  Is it any wonder that the airline industry continues to post losses year in, year out?

Takeaway

If your investing in market research, make sure you’re focusing on customers who are willing to pay a premium for what you have to offer.  Too many businesses target bargain hunters.  In the process businesses ignore the needs of those who are most interested in and value most highly, the goods and services they offer.  Don’t be one of them.

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