Summer is underway, and it’s the perfect time to plan a getaway. After spending days deciding where you would like to go, you finally pick a destination. Flights are only a click away, right? But once you’re seated on the airplane, you might not be aware that a person right next to you may have paid a completely different fare for the same trip.
Same Product, Different Price
Price discrimination is a pricing strategy that involves firms charging different prices to consumers for the same or similar products or services. The motivation simple: the desire to sell more units and earn more money. By charging different prices to different customers, companies can grab the maximum consumer surplus available in the market.The practice is present across different industries and it is more common than you might think—in fact, most companies do it all the time. Every time you a “two-for-one special,” student discount, reduction coupon, or voucher, you’re witnessing price discrimination in action.
Timing Is Key
First, everything depends on when you purchase your ticket. If you buy in March for a trip that will take place in August, you are going to pay significantly less than someone who buys a ticket at the last minute. Generally, people who plan their holidays well in advance are more concerned about paying a lower price than those who book it closer to the departure date.You might have also experienced a frustrating situation when the price of an airfare (or a hotel booking) changes from one day to another, or even on an hourly basis.
Travel in Mid-September on a Sunday Morning
The airfare will also depend on the months during which you will travel. Most people have limited options and would usually take off during school holidays. For these people, vacationing in mid-September would not really be an option. Knowing this, airlines differentiate between peak and off-peak demand periods and charge different rates of airfares.It’s Either Seat Options or a Saturday Night Stay-Over
Airlines also use versioning, a form of price discrimination where different prices are applied based on the quality of the transport service provided. Several forms of the same ticket are available to customers. The high-quality version of an airfare is more expensive but provides travelers with options such as the flexibility to modify flight dates and even cancellation of the ticket without paying a penalty.On the opposite end, the low-quality version of the airfare is “restricted.” There are also versions that are considered as “damaged,” such as a fare with a Saturday night stay-over. Additionally, low-cost airlines like Easyjet or Ryanair charge for extras such as choosing your seat or checking in luggage. Other examples of versioning include traveling in business class—the airfare is higher than for economy class because passengers benefit from more space, better meals, as well as more personalized attention from the airline staff.
Like any other companies, airlines target consumers by using different pricing policies to increase sales—and there’s no reason why you shouldn’t do the same. So if you’re planning a trip this summer, be it on your own, with another person, or with a group of friends or family, keep these points in mind in order to secure the best possible deal when booking your airfare.