Pricing thoughts…

One of the most interesting things about “business” is the issue of pricing. Not so much the actual price of something, but the strange philosophies that we small business owners hold so dear about the concept of pricing.

I got round to thinking about this because I have done far more international flying recently than I wanted. The thing about an airline seat is that there are about 300 on every international flight. And every single seat on the plane has a different price. You would think that the price is dependent on how good the seat is:

• whether it is right next to the toilet,
• or right next to the place where they keep the screaming babies,
• or whether it is at the front of the cabin (warm) or at the back (very refreshing),
• or maybe based on the legroom of the seat,
• or even based on the delightful model in the adjoining seat (or the large, balding, oriental fisherman returning home after 3 months at sea without bathing facilities).

None of these features (or the resultant benefits) have any relationship to the price that you pay.

The price you pay depends on:

• when you purchase a ticket (the later you buy the more expensive it is),
• who you purchase the ticket through (the Internet is cheaper, usually, than anywhere else),
• which country you purchase the ticket in (a LDN/CPT return bought in the UK is about 50% more expensive than the same flight bought in SA).

The price also has very little relationship to the experience you have on board. (Indeed, first-class is better than business class, which in turn is better than diarrhoea, which is better than economy class.)

But, the BA cabin and crew is (subjectively speaking) better than their SA competitors, and both are infinitely better than (objectively speaking) Air Zimbabwe. You won’t see this difference reflected in their prices.

Airlines have some very sophisticated software that does some kind of load management in an attempt to optimise the profit from each flight. I’m not going to try and explain exactly how they do that, but they have spent an inordinate amount of time and money perfecting the art, so I suspect it is adding value to them.

Many years ago on a trip to Canada I wandered into a five-star hotel and asked them what their price was for a room for the night. The receptionist wrote a number on a piece of paper and passed it to me. The price was a lot lower than I expected. I later asked her why she didn’t simply tell me, rather than taking the trouble of writing it down. She told me that there was a strong chance that anybody else at the counter at that time would have paid three times that rate, and they would have been extremely unhappy to know that.

Back to the subject of airlines. At the risk of insulting Africa’s favourite airline, South African Airways, I had an interesting experience on my first flight this year. (Also my first South African Airways flight in a while.) Right at the back of the plane, the very refreshing part, as the plane tapers towards the tail, the middle row of four seats narrows to three seats. In the first row of three seats South African Airways have configured to seats and space for a wheelchair.

I couldn’t resist mentioning that I could see that I was on a South African Airways flight. They had already stolen a few seats. Har Har. My sense of humour was not shared by the cabin crew who proceeded to throw food at me during the trip and I believe, in a personal attack, set the thermostat to match the outside temperature of -56°. Subsequent trips have not been much better.

However, that was an aside to the core issue of pricing. The government has its own approach to the issue of charging its clients. (The government calls them taxpayers.) The approach is simple: how much can you afford? In other words you pay their price (tax) for living in their country, based mainly on what you earn. Once again, not one of us pays the same exact price for the privilege. And once again, the price is not related in any way to the services they provide.

In the light of all this overwhelming evidence of pricing being more of a flexible concept than a hard and fast rule, I remain stunned at the number of people who have just one price, and refuse to change it no matter how busy they get, nor how abused they get, nor how long it takes an individual client to pay them, nor how late their client leaves it before calling them.

Isn’t life interesting?