Pricing Lessons from the Airline Industry

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Andrea, who runs a 50-person printing company does the opposite of John, but with similar results. When she quotes a price to a customer, she's got a special line item titled "AF." The second letter stands for "Factor." And the first letter? Well, what do you call those customers who you hardly see, but when they do crawl out of the woodwork with a small order, it's to you in complaints, requests, and demands that create a lot of unnecessary work? Andrea charges these people more. So Southwest, rather than charging a lame "Priority Boarding" fee, how about putting technology to work to find those similarly high-maintenance customers and up their pricing a mere 10 or 20 bucks? What, like you don't know who they are? Oh yes, you do. We all know who these customers are.

"Preferred Customer" Discounts

And American Airlines…believe it or not, I think you guys do a great job. I'm a frequent flier of yours. So instead of announcing a silly $8-per-blanket charge, why not instead promote your frequent flier and "Business Advantage" plans instead, both of which are excellent. And one of the advantages of using these plans could be "discounts" off your pricing. Let the non-frequent guys pay the extra cost somehow. Give us a break. I signed up as a "Preferred Customer" at the sushi restaurant down the street from me and instead of being told that the price of a spicy tuna hand-roll is going up a buck next month, I get a coupon e-mailed to me offering a 15% discount on dinner. I feel appreciated. I keep coming back. I buy more spicy tuna hand-rolls. Get it?

And to the entire airline industry, why not give Michael, who runs an electrical supply company a call. Or Dave, whose business sells custom signs. Or Terri, who with her two brothers, owns a company that manufactures machine parts. All of these people have one astonishing thing in common: their companies use a price list. Shocking! If you do what they do, then your customers will know what the published prices are for all your services and products. These prices can include all of those extra fees you like to charge. Believe me, Michael's company doesn't charge a customer $50 to replace an outlet and then $250 to the customer next door for doing the same thing. By the way…the "stated" price on your price list can also include that "AF" fee I mentioned above. This gives you the ability to look like a prince when you discount it. Believe me—this works.

Did you know that Brad and Angelina were together at the Super Bowl? Or that Heinz (HNZ) has developed a new and improved ketchup packet that solves all of the problems that the old one had? Do you care? Of course not. It's TMI. Run an airline? Want to charge an extra fee? Ask a small business owner how they would do this. If you do it right, your customers should never even know about it.

Gene Marks, CPA, is the owner of the Marks Group, which sells customer relationship, service, and financial management tools to small and midsize businesses. Marks is the author of four best-selling small business books and writes the popular "Penny Pincher's Almanac" syndicated column. He frequently speaks to business groups on penny-pinching topics. More penny-pinching advice from Marks can be found at www.quickerbetterwiser.com.

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