Behavioral Economics / Bundling / Classes of Service

The Pricing Story

This study has been focusing on unbundling, doing it as a strategy and not as a reaction to economic conditions. I recently read an article by author Seth Godin, who recommended changing the pricing schemes for certain services.  He recommends bundling for previously unbundled services and unbundling for some. One good example of unbundling that I have not specifically covered is his suggestion of Ski lift tickets.

Ski tickets or amusement park tickets all fall into the category of two part pricing. The customers pay an entry fee and can consume as much of the service as they want that is sold to them at the marginal cost (cost of one ski lift ride for one person). In the two examples, the marginal cost is $0 as these operations are fixed cost operations.  That means customers pay nothing for lift rides.

The issues however come from consumer behavior and lack of reference price, the issues that I had previously discussed  in this study. When people have never paid separately for a single lift ride the reference price for a single ride is  $0. Moreover people may perceive skiing as a whole experience and not as a bundle of multiple ski runs.  Unbundling may also reduce the brand premium the ski resort charges. I discussed these in my post on Five reasons not to unbundle.

I do see an opportunity for finding new revenue opportunities from ski lift tickets. The ski resort could sell prepaid no wait cards, (similar to the no-wait option I discussed for Amazon). Skiers could purchase cards for any number of lift rides that will allow them to go in a priority line. Pricing it correctly will help the ski resorts manage the demand and create additional revenue opportunities from existing customers without raising prices for the rest.

Seth Godin says, “changing pricing changes your story”, it does so not only when you bundle but also when you unbundle.

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