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Thursday 3 January 2008

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Market research conducted by the airline “Go” in the U.K between 1998 and 1999 found that consumers hated reading and hearing the word “From” before the price of a product. Consumers preferred prices to be transparent from the offset. This pricing strategy is common in the market place- it is a way of enticing consumers in with low prices and then adding extra value onto the base price.

You can argue that Jetstar should show off that amazing “From $68” ticket to Adelaide. But in reality it isn’t $68… it’s $68 plus taxes, any food and drink you may wish to buy, parking costs (or the taxi trip to the airport) and then, if you really feel like splashing out, you can even get a ticket home(which will mean paying another $68 plus extras on-top of that).

Following the collection of this research, David Magliano (who set the pricing strategy for Go in 1998) decided to set all flights that Go operated at £100 per seat (AU $223 at current exchange- rate). This proved to be a disaster and is predicted to have cost Go between £2.5m and £4m ($5,580,955 and $10,045,720) in missed revenue. The main reason for this was that flights departing at inconvenient/ off-peak times were unpopular and under-capacity. This was due to competing airlines charging better rates for their off-peak flights going to the same destination. The strategy lasted a month before it was changed to a strategy similar to Go’s competitors.

Adding “From…” is a great way for advertisers to show lower prices than competitors and just how good the prices are if it wasn’t for the Government, so it is easy to see why advertisers do it. It is also a great way to highlight the fact that there are other options available when you purchase the product.
It may not show a lot of love (or information), but this strategy is a proven winner amongst advertisers across the world!
 

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