Operations

Segmenting Prices Can Add Big Value To Your Service

Posted on January 2, 2014 by Sara Eastwood-McLean - Also by this author

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Today, airline pricing varies based on seat locations, leg room, boarding priorities and client preferences which have been mined to be monetized.
Today, airline pricing varies based on seat locations, leg room, boarding priorities and client preferences which have been mined to be monetized.

Look around you and you will see a changing environment in every sector of the travel industry. Just yesterday (it seemed) airlines set pricing based on sections of the aircraft – namely first, business and coach classes. Today, pricing also varies on seat locations, leg room, boarding priorities and client preferences which have been mined to be monetized.
 
“Segmenting” clients in other parts of the travel world such as the hotel industry is nothing new either. There are boutique and luxury-based hotels and mid-tier to economy hotels such as motels and inns. Hotels know that not all clients are created equal. In fact, almost none of them are. Travelers have their individual likes, dislikes and preferences, which are more often being used to maximize yield. The practice of targeting different groups of travelers with various pricing strategies has grown in sophistication during the past few years in all travel sectors, with one exception – our industry! As customer relationship management systems extract more data from clients, revenue managers have found themselves armed with more ways to extract revenue.

I recently met up with Doug Anderson from Limos.com (who I invited to talk at our International LCT Show next month on segmentation and what that can do for this industry). Doug concurs that the limousine industry is behind the pricing strategy curve. While surge pricing is a new term that Uber recently made fashionable, it’s far from a new concept. Pricing should be based on supply and demand and works best when you really understand the demand piece of the equation. What a mid-level business traveler values may not be the same as the CEO when using your service. Uber targets the least discerning client – the retail public looking for instant gratification and something that beats standing in the rain while hailing a cab.

Uber does get credit for changing the perception of chauffeured car service – some may argue for the better by making it more mainstream than a service only for the affluent and the elite. The demand or rather the new expectation of the customer also has changed, thanks in part to Uber. Mobile apps that track a car give people peace of mind and make them feel better about chauffeured car service. Doug told me that, “Customers are less focused on how fast the car can get to them, than being able to track their vehicle from the point of booking it." I agree. When LCT surveyed the Global Business Travel Association (GBTA) and asked them what they least liked about doing business with the limousine industry, the runaway response was the lack of consistency with on-time arrivals.

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