Gogo In-Flight Internet Pricing (And How It Applies To Flowers)
Like many people I actually enjoy not being connected during flights. It's a nice break, at least for a while, but as soon as the descent starts I have a finger on the power button, anxious to start up and start dealing with the inbox as soon as we're on the ground.
On a recent trip I considered purchasing in-flight access for the first time. I had a connecting flight with one long segment followed by a very brief stopover that wouldn't allow much time for dealing with email on the ground. It seemed like purchasing a thirty minute pass towards the end of the first flight would be a good investment.
That 30 minute pass would generate $4 for the provider. Now it was up to them to use shrewd pricing to get more out of me.
The first thirty minutes cost $4 or just over thirteen cents a minute. The next tier gets an extra 60 minutes for just $4 more, under seven cents a minute and half the cost of the first thirty minutes. Suddenly that seemed like a much better deal. Now, instead of spending $4 I was ready to spend $8.
The next tier was even more attractive – an extra 95 cents would get me the Mobile Pass which offered access for the rest of the flight. That meant that the final two hours of a 3.5 hour flight would cost less than one cent per minute compared to the thirteen cents per minute for the first thirty. Now I was prepared to pay $8.95.
The problem was the connection – the Mobile Pass could not be transferred over to another flight. The solution? The Gogo Mobile All-Day Pass which could be used on any Delta flight that day for just $10.95. It was the only package that made sense.
It was great pricing. I wasn't even sure that I wanted to spend $4, but after looking at the prices I was eager to pay almost three times as much. The pricing put things in context, framed the value beautifully, and made me feel good about spending more money than I had planned.
The extra $6.95 in revenue for the provider was probably the goal, but their sophisticated pricing also made for a happier and more loyal customer. Even if I felt that $4 for thirty minutes (or just over thirteen cents per minute) was outrageously high I had the option of paying just four cents per minute if I went with the pass.
When the ballpark exploits their monopoly on hot dogs and cold beer by charging outrageous prices most people resent it. It would have been easy for Delta and Gogo to make the same mistake and not discount the larger packages – after all what other options were there?
Instead they recognized the diminishing marginal utility of their product and discounted accordingly. They ended up with a much larger sale and a happier customer who felt they got good value.
This comes up in the flower business a lot. Many men don't really like buying flowers. They can seem expensive, especially given the fact that they only last a week or so. A lot of men who buy flowers do it begrudgingly.
That can change very quickly when the florist offers additional value on "larger" versions of the product. The example used is often a dozen roses for $60. That establishes the baseline value.
Offering upgrades to eighteen roses for $75 and two dozen roses for $90 really changes things in a hurry. The customer that bristled at paying $60 might be thrilled to spend an extra $30 for twice as many roses. I know I would!
The florist makes more money. Sure – the margin on the extra flowers is lower, but they are still profitable. The best news though is that there ii also a happy customer that things they got a great deal.