Dropping prices, rising blood pressure

By Arnie Weissmann
Arnie WeissmannYou're out shopping and see something you like. It's not inexpensive, 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.

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 manage the client relationship in the aftermath. Such a situation led travel agency owner Catherine Inness of Tours and Cruises Unlimited 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 after the final payment was made, the clients received a promotion from Celebrity offering 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, threatening to cancel the trip and never book Celebrity 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 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 original iPhone was too high, and reduced it to $399. Jobs offered $100 in Apple store credits 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.

"Even though we are making the right decision to lower the price ... we need to 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 and follow him on Twitter. 
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