Tuesday, July 28, 2009

Will American Airlines' New Tax on the Poor Take Off?

American Airlines has hiked their checked-baggage fees by $5.00 -- but only for us regular blokes. First- and business-class flyers are exempt from extra baggage charges, as are international flyers and full-fare tickets holders in economy class. Some might call this “taxing the poor” and it seems a questionable pricing practice in the dawning day of equal opportunity marketing.

Extra-baggage fees on domestic flights actually make sense. Most of us haul too much junk around anyway and a trimmed down view of what we "can’t do without" is laudatory. But the marketing engine that applies a surcharge only to certain classes of customer could backfire. In short, marketers should consider whether class-created price differentials are a good marketing strategy.

When the economy was in high flight, the travel industry promised various classes of travelers different treatment than that given to "regular" people. The system worked really well. "Loyalty" and other perks made travelers felt oh-so-special. Now that times have changed -- now that our downwards-adjusted economy includes lots more people with lots less money -- how will class-based pricing strategies fare? Will such distinctions evolve to a marketing revolution? Will consumers demand new egalitarian treatment, stoked by social media participation?

Maybe response to American’s baggage plan will divulge what's ahead . Let’s watch.

-- scrubbed by Marketing Brillo


Anonymous said...

It is so true. Most of the extra luggage on the plane belongs to the folks in the aft part of the cabin. More luggage increases weight, and that messes up an airline's load factor targets.

But I agree that this marketing ploy could backfire. I guess AA should just call it "steerage" and be done with it.

Unknown said...

Great commentary on aeronautics, Dan. Note: Wikipedia says "Steerage refers to the lowest decks of a ship and/or the last rows of an aircraft. This area of the ship was once used to accommodate passengers travelling on the cheapest class of ticket, and offered only the most basic amenities, typically with limited toilet use, no privacy, and poor food." Yep, steerage is correct.