Different types of consumers and their willingness to pay

Airlines’ customers are divided into business travelers and holiday travelers. Their travel purposes are different and the elasticity of travel demand is also different. Moreover, Airlines have found through market research that the prices that different passengers are willing to pay are also different. Therefore, airlines have divided consumers into different types, provided their different price options, and implement price discrimination.

Different time for determining the fare and weekend registration restriction requirements

How far in advance can different customers know their travel time is different, so airlines have introduced options for this: “Unlimited”, “Buy tickets 7 days in advance”, “Buy tickets 14 days in advance”, “Buy tickets 21 days in advance”, etc., And provide different prices accordingly to achieve price discrimination.

The airline’s research found that some passengers do not want to be restricted by weekend boarding. Therefore, the airline specially set up a low-cost ticket type that “must stay for the weekend” and implement price discrimination.

According to the research, airlines found that some passengers always change their travel plans at the last moment. Therefore, airlines have formulated “unrestricted”, “restricted cancellation”, “cannot be cancelled”, “cannot be cancelled (cannot be refunded or changed)” and so on. And divide different prices to achieve price discrimination.

Different aviation service requirements

Different passengers have different levels of air service needs, some customers hope to get the best experience from accommodation to service, while others don’t care about it. Airlines thus customize different services and prices for different consumers accordingly, and there is a division of different positions from first class to economy class

Increase profits through price discrimination

Through this kind of price discrimination, airlines maximize the use of consumer surplus to maximize its profits. Because if price discrimination is to be adopted, it means that airlines must meet all the prerequisites of price discrimination, that is, to meet the different consumption needs of all different consumers, understand their corresponding consumption time, willingness and ability, and provide for each type of consumer to realize their personal customized services.

The methods of price discrimination

As far as airlines are concerned, they can set up different classes such as first class, business class, economy class, etc., and make differentiated investments for different classes, so as to provide different services and relative prices for passengers in different classes, and implement prices. discriminate.

It is also possible to implement different pricing strategies for different types of consumers. For example, business travelers are more concerned about the convenience and flexibility of the journey, because their airline tickets are mostly reimbursed by the company, so they are less sensitive to prices and generally not in advance. When buying tickets, airlines can reserve some high-priced services and space for these passengers. For leisure travelers, they are relatively price-sensitive and tend to purchase tickets in advance. Therefore, airlines can appropriately lower their fares and adopt measures such as restricting refunds to set the threshold of price discrimination through different pricing strategies.

At the same time, they can provide private customized services, starting from the passengers themselves, setting up a richer variety of aviation services, and customizing aviation products for each person according to their different consumer preferences to maximize the use of consumer surplus, thereby maximizing economic profits and realizing price discrimination. Different ticket prices can also be set according to different advance booking times. For example, booking a ticket one month in advance is cheaper than booking one or two days in advance. Consumers with temporary pricing generally have low price elasticity and are sensitive to high prices. Therefore, economic profits can be increased in this way and price discrimination can be realized.

By Demi Z.