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A la Carte or All-Inclusive Pricing?

I recently traveled to visit my brother-in-law who lives in Eastern Connecticut. The expression “there is no way to get there from here” rings true attempting to travel from Durham, NC to Niantic, CT. 

Miraculously, a new low-cost airline, Avelo, announced nonstop flights from RDU to New Haven. Given how close New Haven is to my brother-in-law, my wife and I booked the cheap tickets. We were thrilled with the low cost until we discovered all the extras. 

If you don’t want to sit in the last row, you have to pay for a seat; you have to pay to bring a carry-on bag; you have to pay to not be the last person to board. Amazingly, you have to pay $25 to talk to a customer service representative. And if you want something to drink or eat during the flight, you better bring it onboard. Avelo will not sell you any refreshment including water. 

I must admit that all the extra costs began to annoy me and made me wish my favorite airline, Delta, flew nonstop to somewhere in Connecticut.  On Delta, I pay for my ticket and the rest takes care of itself. (I do have status on Delta which allows for some perks.) 

The different approaches made me think about the kinds of consumers who might be attracted to varying pricing models. The cost-conscious consumer probably appreciates knowing exactly what they are paying for particularly if they can choose cheaper options. They are driven by cost.

On the other hand, the experience-oriented consumer prefers an upfront price and expects to get great service and have a seamless experience. They do not want to pay for every amenity. 

In my industry, the vast majority of consumers choose an independent school for the experience. (After all, their children could attend the neighborhood public school and pay no tuition if they were thinking of cost alone.)  As a result, schools should price their offering accordingly. Independent school parents do not like being “nickeled and dimed to death.”  It would behoove schools to include all costs in their tuition. Forget extra for the yearbook, for field excursions and for after school care. Put it all up front. The one tuition price that includes everything will make experience-oriented customers happier.


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