Post 5: Pricing Strategy
While reading my friend Yu Bozheng(Aaron)’s blog about Flight Ticket and Price Discrimination, I found it’s very interesting in learning about how the price dicrimination works in the airline industry and now understand the reason why people should book their air fare in advance.
Apart from that, I was trying to position myself from a operator’s view to think over how I should charge prices on different customers to maximize my profit. Basically, there are two main categories of customer.
The first type would be leisure travellers. They are always ready to buy tickets well in advance and it’s really hard to charge these travellers heavilyon the price as they have multiple options on choosing air agents, or they could simply rescheduling their trip. For example, students like us definately are defined into this group as we know roughly when school terms end and when they start to book ticket ahead of time.Therefore, operators usually compensate this through strategies on pricing heavily on the second group—the business traveller.
Inflexible schedules, last minute planning, and less sensitiveness to price changes are some characteristics of the business travellers. Without many options and choices, business travellers ususally end up with relatively high pirces as they book their tickets only a few days in advance.
However, to avoid the remaining unfilled seats, operators would be looking for frequent business travellers and offer them the ticket at a reduced price, in which way both the operator and the traveller are happy. If the demand for business travellers is low, they then switch to students and less frequent flyers and that’s when you can see those advertisment on the operators website showing the least air fares.