Herewith another holiday lesson.
This time it’s about alternative (or ancillary) revenues which are all the rage right now – especially in the airline industry.
I call this incremental charging approach ‘plus-pricing’ (though I’ve heard it called much worse).
Big night out
As part of our tourist-in-own-town holiday, Fonnie and I spent one night at a swish hotel.
It was so comfortable, we didn’t want to leave our room.
So we peeked at the in-house room-service food menu.
As expected, the prices were extortionate – except for the gourmet pizza: a mere tenner.
As Fonnie reached for the phone, I spotted a line at the bottom (pictured).
Another eight bucks just for them to bring it up in the lift!
This was enough to put us off our food.
Flying start
When Virgin Australia started charging for food and drink, I was all for it.
I was happy to bring my own sangas and save some loot.
I was less keen to stare at the same three ads for five hours flying home from Bali.
I thought that charging for an in-flight movie (free to deliver to the seat-borne screen in front of me) was downright mean.
Now that I hear airlines are starting to charge for aisle, window and exit row seats, I think plus-pricing may have overplayed its hand.
I was therefore intrigued by this inventive counter to extra baggage charges.
I’m even more interested to hear what you think.
Cough up!
Is plus-pricing a fair, logical and intelligent response by businesses to tougher trading conditions?
Or is it a sneaky, cynical cash grab that ruins every commercial interaction (and the relationships appertaining thereto)?
Maybe it’s somewhere in between.
Or maybe you feel it’s as bogus as a credit card surcharge.
Is plus-pricing situational?
Or merely a matter of taste?
Do you do it?
Have you been done?
Whatever your take,
if you have two cents to rub together,
please add them
here!
Paul Hassing | Founder & Senior Writer – The Feisty Empire
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Author
Adam Finlay
July 3, 2012 at 9:22 am
Nice article, Paul. It’s certainly disingenuous (that is, pretending to be honest and sincere, but not honest and sincere). I wonder why the equation is not one of perceived value, rather than ancillary charges? I would probably buy an $18 gourmet pizza in a fine hotel. One presumes the bellhop is working anyway, and the kitchen just has to divert him from swabbing the decks. Anyway, airline ‘surcharges’ are the ones that get me. By the time you add in baggage plus online booking fee (???) plus credit card surcharge, your discount ticket doesn’t feel so discounted. Perhaps vendors believe (probably rightly) that ancillary charges aren’t a barrier to purchase. And therefore, while sneaky, they’re also viable new revenue options. That will be 2%, sir.
Author
Paul Hassing Founder & Senior Writer - The Feisty Empire
July 3, 2012 at 9:29 am
Nice comment, Ad! I love that word, but am never quite sure how to use it. Now I know!
The silly thing is, if that pizza had’ve cost $18 delivered, I probably would’ve gone for it. How come that?!
As usual, I’m left wondering if I’M the problem …
Writing this post, I recalled what a thrilling thing it was to visit Tullamarine airport as a child. In those days, the car park was ONE level, and dotted with eucalypts!
In the intervening decades, I feel the joy of flight has been steadily eroded. Now I’m perfectly content to holiday 1.5 hour’s drive from home.
Am I the only one? Or could all these plus-plus-plus straws break the original camel’s back?
With best regards and many thanks for your fine thoughts.
Author
Paul Hassing Founder & Senior Writer - The Feisty Empire
July 3, 2012 at 9:42 am
Speaking of childhood reflections, I recall flying to Fiji as a fairly small tacker. Pan American World Airways (Pan Am) treated me like royalty and gave me a chock-full activity pack that could’ve easily passed for a xmas gift (and was still generating pleasure weeks after we returned). AND they took me to meet the captain in the cockpit. They went out of business in 1991. Perhaps good guys really do finish last …
Author
Adam Finlay
July 3, 2012 at 9:47 am
I also loved visiting Tullamarine. I suppose because we were young and carefree, and our parents were paying the two tuppence surcharge to handover cash only for the free parking that didn’t yet exist. Those were the days, my friend.
Author
Paul Hassing Founder & Senior Writer - The Feisty Empire
July 3, 2012 at 10:00 am
And yet … correct me if I’m wrong here – air travel in the early 1970s was MUCH more expensive than it is today. My folks sure weren’t loaded, but they managed it – with nary a plus-plus in sight. Could all-in-pricing gain on the swings what it loses on the roundabouts?
Author
Adam Finlay
July 3, 2012 at 10:03 am
Yes, you’re right … I think relatively speaking it was more expensive. And it would be nice to have a ‘Fly away no more to pay’ price, wouldn’t it?
Author
Paul Hassing Founder & Senior Writer - The Feisty Empire
July 3, 2012 at 10:06 am
Yes. I’m a mean bugger, but I’d actually pay MORE, up front, in total, to avoid a school of post-booking pirhana bites.
Author
Susan Oakes
July 3, 2012 at 10:28 am
Hi Paul,
I have no problem with plus pricing because it is ultimately up to me as a consumer whether to pay it or not. I also think the decision revolves around the context. For example if I was on a long haul flight I would pay for an aisle seat. In your comment above when you said you would have probably paid for the $18 pizza hit on one of the issues. By having a price and then separately having the extras means the purchase decision is a little more complex as you have to one decide what you will buy and then secondly whether you are prepared to pay for them to bring it up. That said it may be a mandatory thing that you have to spell out the extras separately.
Often it is the way it is communicated that will affect how consumers feel. By the way what did you finally end up eating?
Author
Paul Hassing Founder & Senior Writer - The Feisty Empire
July 3, 2012 at 10:37 am
Great to hear from you, Susan!
I like your assessment. Yes, complexity was a factor. We were on a long-awaited holiday. I wanted things simple. And fun. Nice insight!
Yet in configuring an online MacBook purchase (hold on to your hat!) at my work desk recently, I was quite happy to (not) tick the various boxes. I guess much depends on context.
But woe betide the supplier who tries to sneak stuff past me …
I sent Fonnie into the cold to buy nori rolls from a CBD food court. I got some great photos of her – braced against the howling wind, struggling with bags, etc.
Such happy times …
Author
Malcolm Owens
July 3, 2012 at 11:20 am
This is something I really hate!
Fees, taxes, commissions, secret kick back and gratuities may apply.
I recently booked a flight using frequent flier points – the fees charges and taxes made the cost flight comparable to the discount fare I could have purchased off their web site. Thanks for your loyalty, not!
When booking accommodation in Hawaii I saw that the hotel charged a $25 per person per day ‘resort fee’ what the… it’s called a resort, that’s why I want to stay there and it’s four star so not cheap so what gives?
Will I need to deposit coins to get a sheet of toilet paper? So I booked somewhere else and the accommodation bill ran to just under $5,000. So what did they lose by such a petty claim on materialistic dominance?
Happy to be fleeced at tourist destinations but that is just sneaky and not appreciated. On an airline, sure charge for food, but a movie? What is the cost of maintaining those small screens, having the cabin staff hand them out, take money, provide change, secure your driver’s licence or other suitable identification and collect again at the end?
Sunk cost, don’t thing so! Show a movie and people will want to fly with you. Add $5,00 to the fare – who cares!
Author
Paul Hassing Founder & Senior Writer - The Feisty Empire
July 3, 2012 at 11:26 am
Hi, M! I thought we might hear from you (and am jolly glad we did).
Man do I get you on the frequent flier thing. Dad asked me to find out where his points could take him the other day. The add-ons were INSANE!
I thought a free flight was … a free flight. WRONG! I’m so I bailed out when I did:
http://myob.com.au/blog/divided-loyalties/
Thank you, as always, for adding substance and savour.
Author
Leon Noone
July 3, 2012 at 2:01 pm
G’Day Paul,
The one that gets me going are the retailers who charge for the bag they provide to put your purchases in. If I’m going to such a place I almost make sure I take my own bag.
The thing about this practice that gets to me is the lie that it’s “for the sake of the environment.” This is utter rubbish. The retailer benefits two ways. They don’t pay for a bag they don’t provide. If the do provide a bag, the bag costs them fractions of a cent and they change far more than that.
In case you or your readers have any doubts, let me repeat. This is a money making scheme for the retailers. It has absolutely nothing to do with environmental concern.
It’s the deceit that sickens me
Go Bombers!
Best Wishes
Leon
Author
Paul Hassing Founder & Senior Writer - The Feisty Empire
July 3, 2012 at 2:14 pm
Thank you, Leon. I’m glad you brought this up (and agree deceit is anathema).
Like you, Fonnie and I have our own reusable shopping bags. We resisted for ages, as we thought it’d be a total drag carting them round.
Yet these days, when we do the shopping togther, we simply take them out of the car boot and into the supermarket.
Where we used to have paper-thin, side-splitting, finger-slitting plastic bags tipping rolling, fizzing bottles of diet Indian tonic water all over the joint, we can now stuff all our tucker in our super-strong reusable bags and bugger off apace and without a care.
And save the planet.
Go Doncaster!
Author
Jason
July 3, 2012 at 4:23 pm
Allo,
I fly regularly, both locally and internationally. I have no problem with a-la-carte airline pricing. I can pick and choose what I want, and I for one don’t really care where I sit or what I eat. I think the carry on baggage only fares are great too for domestic travel when I am going for just a few days.
What I don’t like is the airport surcharges and departur etaxes and fuel levies that are added at the end of the proicess. You often don’t have any visibility of this until the last screen before payment. That is sneaky!
Sure, the airlines are trying reduce costs and they must be succeeding as this method of pricing is practically ubiquitous now. Look at Qantas’ ‘full service’ international buesiness – it loses money hand over fist. Clearly budget and ‘incremental charging’ pricing models must be working better for the airlines. But I think the consumer benefits too from reduced costs being passed on.
Overall I think the consumer who educates him/her self on what deals are out there and how they work is the winner. I have no evidence, but I would imagine that a flight to say, London, is cheaper today in real terms than 20 years ago. Air travel was once the domain of the businessman and the wealthy, now it is within reach for most.
Author
Paul Hassing Founder & Senior Writer - The Feisty Empire
July 3, 2012 at 4:28 pm
Nice comment, Jas! From micro to macro, you covered a whole lot of ground there. AND you got your bag out before anyone else! Many thanks for choosing Empire Air!
Author
Tash Hughes
July 3, 2012 at 6:10 pm
I hate add on prices if they are hidden or unexpected. Give me a list up front that I can choose from and that’s ok, but tack extras on as we go and I often leave – that’s exactly why I don’t buy from Amazon (I didn’t like postage charge after a note saying ‘you qualify for free shipping with this item’!)
Just like websites that don’t show shipping costs until the last step of the purchase – rarely will I hang around long enough to find out the price.
Room service is by definition delivered so I would just expect the prices to already include delivery fees – I wouldn’t pay an extra $8 either.
Ah, Tullamarine (from someone who spent hours there on Friday thanks to a cancelled plane I wans’t notified about) – I remember standing on the deck outside for hours waving people farewell. That was the fun part of the airport and it’s long gone… Free entertainment for the kids I think it was called!
Author
Paul Hassing Founder & Senior Writer - The Feisty Empire
July 3, 2012 at 6:16 pm
Good on you, Tash. We’re starting to get some interesting trend lines.
I’d forgotten all about the outside deck! It was all gravelly, wasn’t it? With maybe a ten-cent binoscope or two? You really could wave at the planes, separated by nothing but air.
The sound was enough to blow your little ears off. And remember that smell, that gasolene smell …
Smelled like …
Liberty.
Author
Tash Hughes
July 3, 2012 at 8:03 pm
Yes, it was pebble mix on the ground I think
And absolutely had binoscopes – I remember having to ask for coins to use it but no idea if it was 10c or more!
I was surprised at how much of that smell hit me at the airport on friday to tell the truth – I knew I was at the airport!
Author
Paul Hassing Founder & Senior Writer - The Feisty Empire
July 3, 2012 at 9:16 pm
Such fun to share early memories. This is not at all what I expected from this topic! A lovely surprise, Tash!
Author
Phil Owens
July 4, 2012 at 11:49 am
Great post, Paul. What is the difference between an $18.00 pizza and a $10.00 pizza with an $8.00 delivery charge? Nothing…..and everything!
We often object to these fees and extra charges because:
They go against what we think is ‘fair’
They breach our ‘expectation’ of the interaction.
The breakdown of fees seems ‘sneaky’. ($8 for delivery, what the?)
When consumers have the choice up front (the price menu option) it allows them to make informed, tailored choices. There is a measure of control in such an approach which some consumers will find rewarding. However, when we are introduced to charges later in the process (once we have psychologically agreed to a ‘price’) it triggers our sense of injustice.
However, once into a sales funnel, most people will grumble but will continue to progress with the additional payments because they have already made that psychological commitment to the purchase. They have entered that funnel most likely for price reasons, so they are committed to getting the ‘up front’ price.
I suppose the point I am getting to is that it is not the additional fees and charges, but when and how they are introduced to you. As choices, you feel great. As sneaky additions – you feel cheated and undervalued. Perhaps a lesson for us all in how to deal with pricing and the customer.
As an aside, Ryanair (the super budget airline) create brilliant guerilla marketing by stirring up outrage with such concepts as “we will remove the seats and make customers stand” and ‘you will have to pay for the toilets”. The message they follow with is how they are super cheap (I once flew for 10p plus taxes, charges, surcharges, fees, contributions, additional costs and the like to Dublin to drink Guinness and watch rugby with them, but that is another story!. Even with all the extras, it was still relatively cheap.) Ryanair were using the outrage over the potential additional charges to generate heaps of free publicity. So there is plenty of outrage out there for this concept…but it still works for their business.
Author
Paul Hassing Founder & Senior Writer - The Feisty Empire
July 4, 2012 at 1:06 pm
By Jove that’s a value-add comment, Phil! I shudder to think what the final cost will be. But you totally nailed my feelings of being tricked and trapped by that damn funnel. And your Ryanair report is the icing on the cake. Thanks heaps!
Author
Des Walsh Social Media Strategist & Business Coach
July 4, 2012 at 12:02 pm
Yes, the sneakiness of the small print extras spoils the customer experience. The roo jacket in the piece you link to is hilarious – just hope I don’t ever have to sit next to someone wearing one.
Author
Paul Hassing Founder & Senior Writer - The Feisty Empire
July 4, 2012 at 1:12 pm
Nice to see your face again, Des! (And to get the thoughts behind it.)
My research also turned up further (putative) fees for people whose bodies transend various societal norms, but it quickly became too sordid.
I concur it’s indeed possible (and rather sad) to kill the customer experience with a thousand (paper) cuts.
Many thanks for your return visit.
Author
Paul Hassing Founder & Senior Writer - The Feisty Empire
July 4, 2012 at 1:16 pm
transcend
MYOB
Lauren Ridgway Social Media Manager
July 4, 2012 at 12:15 pm
Interesting topic Paul.
Considering you can’t pick up the room service food yourself – delivering to your room is the very crux of ‘room service’ – you would expect that the prices included the delivery!
I used to hate the ‘public holiday surcharge’ in restaurants (in fact some cafes even had a weekend surcharge!) and was pleased when this practice was banned. Instead, restaurants now have to have a separate menu if they want to charge more on public holidays.
Author
Paul Hassing Founder & Senior Writer - The Feisty Empire
July 4, 2012 at 12:50 pm
So nice of you to join us, Lauren!
I’m glad you can see my point. A bakery we used to use whacked a 20% surcharge on Sunday trading, but something tells me that extra loot wasn’t making it into the pay packets of the hard working staff.
We switched to another bakery, and when I returned to the old one some months later, the surcharge was gone (possibly the folded it into the … dough). Haven’t been back for yonks now. Don’t think I ever will.
Best regards, P.
Author
Paul Hassing Founder & Senior Writer - The Feisty Empire
July 4, 2012 at 12:53 pm
Egad! Speaking of bakeries and extra charges … http://www.smh.com.au/opinion/political-news/accc-puts-brumbys-carbon-tax-claims-under-microscope-20120704-21gj6.html
Author
Paul Hassing Founder & Senior Writer - The Feisty Empire
July 23, 2012 at 9:22 am
More reading:
http://www.theage.com.au/travel/travel-news/letters-hotel-credit-card-fees-are-absurd-20120427-1xpxw.html
Author
Paul Hassing Founder & Senior Writer - The Feisty Empire
August 11, 2012 at 6:36 am
This certainly back’s up Malcolm’s report:
http://www.theage.com.au/travel/activity/great-outdoors/letters-25-a-day-for-hotel-wifi-why-20120810-23z63.html