I read an interesting article at Knowledge@Wharton titled Nickeled and Dimed: Is It Possible to ‘Over-fee’ Consumers? The basic questions are how much is too much? At what point do consumers revolt against your brand and defect?
The short answer to these questions, like so many others, is “it depends.”
Customers have much different perceptions about what products are suitable for them, and about what price points are warranted. In short, the value equation for each customer is different. Airlines, banks and other industries have tried to address this nuance and uniqueness by charging for each item. Their assumption is that consumers will pay for add-ons that are valuable to them and their specific circumstances.
One approach airlines haven’t tried recently is to model pricing after hotels that offer all-inclusive vacation packages. (Southwest comes closest.) Why not acknowledge the differences by offering pricing packages that (1) include everything and (2) require payment for specific items. Like other industries, they should understand the typical costs to service their customers. By offering an all-inclusive fee, airlines would appeal to customers who want simplicity and no hassles. By continuing to offer “pay by the drink” fees they could appeal to even the most cost-conscious.
Another industry that could benefit from improved customer focus regarding choices is cable TV. In that industry, the only pricing choices that exist contain several unneeded and unwanted programming options. Pay per view fight night notwithstanding, wouldn’t consumers prefer the ability to pay for programming at a more granular level? What about charging for minutes, or hours, rather than the number of channels and the type of programming?
The pivot point is that since customers have different definitions of what “good service” and “good pricing” is, companies have to manage to a wide segment of consumers. It’s in their best interests to service both simultaneously, rather than making the choice for consumers.