A couple years ago I was flying from Montreal to Halifax on the tail end of a big trip to Brazil. Air Canada, economy class. The flight attendant came by to offer me a drink and a snack, and I enjoyed my complimentary ginger ale. Upon reflecting on my years flying with Flair Airlines, as a broke university student, I was hit with a realization. Air Canada was taking advantage of a piece of my human psychology that defies all logic and ties in perfectly with a challenge small businesses are facing every day.
Head to Head: Flair Airlines VS Air Canada
When I take a Flair flight, the savings are BIG. We’re talking about a $200-$300 price difference (sometimes more). One difference that always stands out to me is the service. Mind you, I’ve never actually had a bad customer service experience on Flair, but when it comes time to get snacks and a drink it’s a completely different experience. On Flair, the flight attendant comes by, and if I want something I flag them down, pick what I want, tap my card and mourn the $5 price hit my bank account just took for a can of pop.
On Air Canada, the flight attendant asks what I want, I pick, and they hand it to me without so much as pulling out a debit machine. I’m now happy because I got a free drink and snacks, but the irony here, is of course, that the price of the drink and snacks was built into the ticket price… times 40. But that doesn’t matter when I’m already on the plane, enjoying a cold drink and snacks at 38,000 feet in the air. What matters is I remember having a better experience on Air Canada, or WestJet, or Porter… especially Porter with the complimentary beer.
Small Details Create Big Experiences
These airlines use one of the most effective plays in the modern marketing handbook: provide a small service to the customer that says “we value you, and we care about you”, and carries little extra cost to the airline, which they sell as part of an elevated experience. It’s why Costco sells $1.50 hotdogs while charging $50 for a membership, why full service airlines can charge hundreds of dollars above discount carriers, and how they can both play me like a fiddle.
The point here is that how a customer feels, more often than not, overrides logic.
The Small Business Price Trap
When I shared my 38,000-foot ginger ale theory with our team today, our founder, Scott, laughed and said he falls for the exact same trick with the complimentary pretzels. It got us talking, and we realized this airline strategy is the exact same dilemma we help so many of our clients face.
Many small businesses pick a price that they think they can get away with and they stick with it because it feels right to them, overriding the logic that they too can bring up their prices and create an experience that customers will gladly pay extra for. And here’s the catch, many of them are already providing that elevated experience and they don’t even know it.
I can’t count the number of times we’ve worked with clients who offer truly unique experiences customers would happily pay a significant premium for, and who don’t have it built into their price. By simply working out a solid pricing strategy they have been able to boost revenue exponentially.
Strike the Perfect Balance and Watch Profits Soar
A solid pricing strategy requires an understanding of consumer psychology, your competitors, your unique service offering, and the current state of the market you’re in. It’s a challenge to hit the right balance; too little and you’re leaving money on the table, too much and you risk turning customers away. But when you strike the perfect balance, it can be the quickest way to achieve the most touted business goal in the book: to increase profits.
So next time you find yourself running on razor thin margins, worried about breaking even, just take a deep breath, it may be your pricing. And with a few small changes to your strategy, you’ll be able to afford the ginger ale.