Tuesday, 20 April 2010

Ten ways to (c)ash in

Profitable and not-at-all exploitative recommendations for transport and accommodation providers seeking to make the best of this week's Icelandic volcano:
  1. Create a steep demand curve for your tickets but start low. If you simply ramp up the prices of your train tickets, ferry berths or car rentals, you'll be accused of price gouging. Short-term gain but long-term hit to reputation. Instead, sell the first few tickets at the same price as you normally would, so that you can claim not to be exploiting anyone, but as your capacity fills, increase price steeply. I suspect this is what Eurostar is doing, but they're still being criticised for exploitation - so the next tip is:

  2. Make a big noise about how you're contributing to the rescue effort. We're all in this together you know, it's the Dunkirk spirit and all that. You're laying on extra buses, trains and ships - and while you need to ask a fair price to help cover your costs, you're saving people hundreds of pounds in hotel bills. Or you're opening up extra hotel rooms to save them thousands of pounds in travel costs.

  3. Provide a non-standard product at a premium price but sell your normal product at the standard price. For instance, make sure your standard class seats are sold at the usual price and you can charge what you like for first class. Of course, if you happen to run just one standard class carriage out of ten, you'll sell out of those instantly and everyone else will have to pay four times the price for first class.

  4. Unbrand yourself. If Joe & Co Bus Tours shows up in Barcelona charging €700 a ticket to get to London, people will grumble but buy the tickets anyway. The following week nobody remembers Joe & Co - or notices that they were a wholly-owned subsidiary of Thomas Cook Travel.

  5. Make your money on complementary products. If you feel obliged to keep the prices of train tickets or hotel rooms down, you can charge more for meals, booking fees or other associated services. A better alternative, however, is:

  6. Bundling. Provide people with lots of extra value for the high prices you're charging. Sure, the hotel costs £800 instead of £200, but you get free meals, tickets to the local musicals, spa treatments...never mind that you wouldn't have bought those normally and the hotel makes a huge profit margin. It's a package, you'll never get exactly what you ordered.

  7. Make your prices impenetrably complicated. Mobile phone companies are masters at this - their price plans are designed specifically to prevent comparison and ensure that they can hold profit margins up. Why don't you try it too? Maybe strike a cross-marketing deal - your trains, another company's buses and a ferry operator's ships. Add border-crossing fees, make sure the price changes between one train and the next, make your meals expensive in standard class but give them out free in first (but not including wine), offer a single through-ticket at a surcharge...soon enough your customers will give up and pay up.

  8. Swap customers. French train companies can gouge British tourists with impunity and vice versa - after all, who's going to go back and criticise once they're safely home? Eurostar would be well advised to sell all its tickets through local partners who can absorb the blame for the high prices.

  9. Co-opt a local associate to charge even more than you. Once they've seen the next-door hotel charging €2000 a night, your €800 doesn't look so bad. And once you've filled all the €800 rooms, your neighbour will make a couple of really profitable sales. If he doesn't, make sure to give him a fair share - next time it will be your turn.

    And above all...
  10. Don't feel guilty. One of the worst failings of most suppliers is to let customers guilt-trip them into cutting prices below the market rate. Ask yourself - if you had to choose between buying a Christmas present for your children or their children, who would you pick? Well then, why are you subsidising them? You aren't the one who's outstaying their welcome...

    3 comments:

    Rhidian Jones said...

    Excellent post!

    Leigh Caldwell said...

    Thanks Rhidian, good to see you reading the blog! Where can I find yours?

    codemonkey_uk said...

    Isn't 9 a form of price fixing, and therefore anti-competitive / illegal?