opinion
Dropping prices, rising blood pressure
You’re out shopping and see something you like. It’s not inex- pensive, but the salesman points out its fine qualities. You buy it, feel good and look forward to enjoying it. The next day you walk by the store and see the same item in the window with a “25% off” tag on it. You might feel angry,
you might feel foolish, but worst of all, you no longer feel as good about
what you purchased.
course.
The situation is not unique to Celebrity,
the cruise industry nor the travel industry.
In the long run, dynamic pricing strategies are designed to stimulate additional
sales, which benefit the supplier, intermediary and consumer.
But that’s on the
macro level. On the individual case level, it can
create time-consuming
situations that result in
ill will and lost customers. While they may
be small enough in number that they’re
considered a cost of doing business, there is
collateral damage to the brand.
Royal Caribbean Cruises Ltd., Celebrity’s
parent, has experimented with creative
options to avoid these situations. In one,
a line looks for cities with few passengers
on a sailing, then offers promotional air to
that market only (and offers the same airfare deal retroactively to the few who had
already booked).
Carnival Cruise Lines’ Early Saver program offers protection on price, though its
rules appear to exclude subsequent offers
of enhanced credits.
In looking for best practices on dealing
with price reduction fallout, I came across
a letter written by Steve Jobs after Apple
decided its $599 rollout price for the origi-
nal iPhone was too high, and reduced it to
$399. Jobs offered $100 in Apple store cred-
its to those who purchased early. He wrote,
in part:
“There is always someone who bought a
product before a particular cutoff date and
misses the new price. … If you always wait
for the next price cut … you’ll never buy
any technology product, because there is
always something better and less expensive
on the horizon.
FROM THE WINDOW SEAT
And that salesman who persuaded you
to buy? You resent him now.
Travel agents often find themselves in the
uncomfortable position of the salesman
who didn’t have foreknowledge
of discounting but must man-
age the client relationship in the
aftermath. Such a situation led
travel agency owner Catherine
Inness of Tours and Cruises Un-
limited in Lantana, Fla., to write
me an email with the subject
line, “Things that keep me up at
night.”
In short: She booked loyal
Celebrity cruisers on a Celebrity
sailing six months in advance. A week af-
ter the final payment was made, the clients
received a promotion from Celebrity offer-
ing twice the shipboard credit the clients
had received, but on new bookings only.
Despite calls from Inness and the clients,
Celebrity offered only a polite “sorry.”
The clients were steaming mad, threaten-
ing to cancel the trip and never book Ce-
lebrity again.
With Inness’ permission, I forwarded her
note to Celebrity CEO Michael Bayley.
Bayley responded, in part:
“At Celebrity, our strategy —
designed to benefit our travel
partners and guests alike — is to
open deployment with our best
pricing. Generally, the earlier
you book, the better the price. …
Booking early offers our guests
the opportunity to book the
exact stateroom they prefer. …
And, while offering a lower price
down the road is not at all part
of our strategy, there are instances when
we need to team with our travel partners
to drive more business. … Guests who
booked early in the process have always had
the opportunity to obtain the new price by
rebooking without penalty, if they do so
outside of the final payment period.”
A lot hinges on those final 10 words, of
Arnie Weissmann
Editor in Chief
do a better job taking care of our early
iPhone customers as we aggressively go
after new ones. … Our early customers
trusted us, and we must live up to that
trust with our actions in moments like
these.”
Jobs made pricing integrity central to his
brand — discounting simply doesn’t occur
for Apple products — and his last sentence
demonstrates he understood the strong
linkage between pricing and brand.
Discounting fills ships but reduces margins, and no one wants to give up the higher-margin business that’s already locked in.
Still, the problem nags, and the creative
pool of marketing talent in the travel industry could spend yet more time on this
fundamental yet endlessly recurring issue.
Email Arnie Weissmann at aweissmann@
travelweekly.com, or follow him on Twitter @
awtravelweekly.
