You Charge What you can Get Away With
Administrator
If you look around the fellow passengers in a plane, you will be stuck with the realization that some people may be paying 3 to 5 times more than others to be in the same plane, enjoying the same service.
If you make a phone call, that same phone call may cost ( depending on what service you are using) free, or it could be at 2 or 3 dollars a minute. And it does not matter whether you are calling somebody 10,000 miles away or somebody next door. The person you are talking to halfway around the world may be free, and you may be paying a dollar a minute to talk to somebody in the same building.
We are in an economy where you don’t get what you pay for. You get charged on an amount the vendor can get away with.
One of the best examples I can give is internet in hotels.
This is probably one of the cheapest amenities a hotel can give. ( after the initial infrastructure investment, it is almost free to give out — compared to giving free coffeemaker, ironboards, breakfast, swimming, gym, etc). And it is something that many people look for that we thought a hotel that does not offer such would be at a competitive disadvantage.
It did not work out that way.
Of course, any hotel worth its salt should have internet, but many are not providing it for free.
In fact, the irony about it is that as per my experience, most budget hotels offer it for free, and most luxury hotels offer it at an outrageous price ( $2 or more per hour, $10 to $15 per day).
I got into conversation with an attendant from a big name luxury chain, and he admitted that this was always the complaint of guests. But the hotel chain figured ( as do most luxury hotels) that people who are paying $150 to $250 per day won’t mind an additional $10 for the internet since they are company reimbursable anyway. He figures the hotel easily earns thousands of dollars extra per week by choosing to charge for it - so what the heck! It was worth it to argue for a few times a week, or maybe ocassionally losing or frustrating a guest.
That , my friend, is the internet economy.
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Posted in FrontPage, on Business |




December 16th, 2007 at 1:43 pm
The book Strategy and Tactics of Pricing by Nagle and Holden contains excellent discussions on different pricing schemes. The funny thing is when you understand why vendors charge so ridiculously, the irritation lessens, hehe.
December 24th, 2007 at 6:47 am
I think there is nothing wrong with a business trying to create for itself another source of moneymaking opportunity - in this case, the charging of internet.
The danger however, is when the company is losing customers because of it - this becomes a bad way of doing business.