Pricing is an incentive. Make sure it’s the right one.

By now everybody’s heard about American Airlines and their new $15 fee for any checked bag, and the reaction has been almost universally negative. This is in part because nobody ever likes to be told that something that was free no longer is. But American’s move, which might be matched by other airlines, raises some interesting points about pricing.

Price is a powerful incentive. For commodity products, it’s one of the biggest incentives in getting someone to purchase. For other products and services, it’s not only a way to differentiate yourself from competitors, but also a way to encourage your customers to behave in ways that make it easier for you to make money.

The American Airlines fee seems like a big loser on almost all counts.

Now, I doubt it’s really going to drive many people away from American; let’s face it, if you live in a hub city like Dallas and you need to go places, they are often going to be the best way to get there, fee or no fee. Very few people will pay $100 more for another airline’s flight or put up with connections instead of a direct route over it. And their best customers often won’t pay it; business travelers are less price sensitive and often carry bags on anyway, and elite members of their frequent flyer program won’t pay it.

So yes, they’ll recover some of the costs of baggage handling, and I can see why that’s appealing in a cash-strapped business, and odds are good that all of their competitors will start doing the same thing.

There is, however, another cost factor at work here: boarding times. I sat on a Continental flight from Houston to Newark this week (two of their hubs) and watched the chaos as people got onto this completely full flight and tried to get their bags into overheads. Space was short, so people scurried around the plane, at one point forcing about ten people to back off the plane into the jetway to enable someone to get back to his seat. Needless to say, we didn’t pull away from the gate on time, and we only landed in Newark on time because Continental seems to pad their schedules so that they can be incredibly late and still be “on time.” (I’m waiting to see the schedules with eight-hour flights from Houston to Newark show up. Hey, we’re on time!)

Think of Southwest, masters of quick turnaround of their aircraft. Maybe flying on American (and others) would be more pleasant and efficient if they encouraged people to check their bags so that boarding could be very, very quick; how about $15 for a carry-on other than a laptop bag or purse? They’d recover some costs through that, anyway. (Full disclosure: yes, I’d complain about that like everyone else.) And maybe they could stash a few more passengers in the now-empty overhead bins… (I’m kidding, in case anyone from JetBlue is reading and thinking of expanding beyond restroom seats).

There’s a bigger issue for the whole industry, though; these kinds of penny-pinching moves just affirm the growing sense among travelers that getting on a plane is a hateful, nasty experience.

I fly because I have to. It’s less appealing every time I do it. I like to travel, I like to go outside the US, and there are few options.

But what about those travelers in Boston who need to go to New York and can say, “Hmm, there’s the shuttle, but there’s also Amtrak.” If two or three people are going, the car suddenly makes a lot of economic sense. Heck, the bus would be as comfortable as a plane, even if you didn’t want to admit to a client that you’d taken it.

What about people thinking, “Do I really need to go to California for this? Maybe we could try videoconferencing.

We’ve already gotten used to trudging through security, little to no food, unexplained delays, deep vein thrombosis-inducing seats, and all the rest of it. The bag fee becomes just another little thing to make us want to avoid flying. Sure, we’re all still going to do it when we have to, but when we have options, those options are relatively appealing.

Dallas is an easy four hour drive from Houston. But that’s a long drive, and there was a time I’d always think, “Maybe it would be nice to fly.” There’s not a chance of that now; it doesn’t save much time (it just saves the effort of having to pay attention to driving for the whole trip), but honestly, that’s more pleasant than getting on a plane. If there was a train on that route I think the airlines would empty right out.

Pricing is an incentive. Airlines certainly need to be thinking about cost recovery, but I think it’s risky for them to ignore the message they’re sending to customers by adding annoying charges for a not very pleasant experience.

(There’s a good discussion of all this taking place on Ben McConnell and Jackie Huba’s Church of the Customer blog.)

---

Did you enjoy this post? Why not leave a comment below and continue the conversation, or subscribe to my feed and get articles like this delivered automatically each day to your feed reader. If you don't have a feed reader, you can always have these articles delivered to your email inbox every day. Click here to sign up.

The Opinionated Marketers | Powered by WordPress | ElegantBlue is a custom theme by Nathan Rice