Tuesday, June 25, 2013

Human-Centered Price-Bundling Innovation

I only read a very short article on this, so I am adding a little of my own ideation to enhance this as an example of human-centered price-bundling, but hopefully Germanwings (the budget airline of Lufthansa) really does have this in mind.

I am going to use as my target market for this thought exercise the budget business traveler, but many of these also apply to others.

The reality of selecting flights is that we search according to the constraints of the date/time we need to travel and then purchase the one with the lowest cost, perhaps with a little flexibility to avoid 6am flights, multiple layovers, or flying through Chicago to get from Boston to NY. 

So the business reality is that airlines have stripped out every possible amenity (meals, checking luggage, pillows, movies) so that they can appear at the top of the search engine results page sorted by price from low to high.  Then if you want any of these amenities, you pay for them separately, often at the airport or on the plane.

What are the customer pain points? 
  • "I often have very little time before and after flights because I am rushing between meetings, trying to get work done, getting picked up by a retail shuttle service that won't wait for me.  So I don't always have time to grab a meal, pack carefully, etc. I show up at the Gate tired, frazzled, and without any of my own amenities. I have to buy the airline's overpriced items."
  • "But I am working on a minimalist reimbursement from a grant (academic), client (consultant), or work project (corporate) that doesn't reimburse me for any extras I buy in the terminal or on the plane."
  •  "When searching for flights, whether it is me or the corporate travel department, the primary objective is searching for the cheapest flight.  So I have to pick one of the stripped down quoted fares."
 So Germanwings has these bundles that you can add on to your ticket during purchase.  I am assuming for this thought experiment that they appear as part of the ticket price rather than as added on amenities.  Otherwise, it doesn't satisfy pain point two.

So instead of buying a meal (well, "sandwich box") and a pillow on the plane and being stuck with a $15 unreimbursed bill, you add a "medium bundle" to your ticket at the time of purchase, which gives you two free amenities.  Or perhaps a "full bundle", which gives you a checked bag, meal, pillow, headphones, and one alcoholic drink.  And your receipt just says $375, not $300 plus $50 checked bag, $7 meal, $6 beer, $2 headphones, $10 pillow.  But when you did your search on Kayak, it originally showed up as $300 because the bundle is optional. 

This is not just good for the traveler, but also the narrow minded company because the amenities will probably make you at least an hour more productive in the long run - paying for themselves.