Return to our Home page Search
Click here for the hotel and hospitality news from around the globe Hotel, Travel and Hospitality Articles Videos and in-depth Interviews
Read more now
Read more now
Read more now
Maximizing Revenue via Irrational Behavior of Consumers.
By Vijay Dandapani ~ Hotelier's outlook on NYC, travel and the industry
Thursday, 6th March 2014

Tiger mom Amy Chua is out with a new book which controversially suggests that a principal reason certain ethnicities have better academic and career outcomes is their ability to control impulsive behavior in most facets of life. Presumably such behavior results in more sustained efforts and deliberating before acting.

While academics and others debate the merits of her polemical book what is clear is that a sustained effort at steering humans away from impulsive behavior likely will result in many tradtional pricing models being upended.

Pricing models across many industries consciously or not seem to rest on irrational behavior among consumers such as the desire for instant gratification and the anchoring effect.

Instant gratification often makes people settle for less as when someone chooses a half a box of chocolates today as opposed to a full box the next day or more frequently (and expensively) in car showrooms when customers often buy a "fully loaded" car frequently with unneeded features and colors that they did not intend on initially.

Anchoring is more pervasive in brick and mortar retail where customers tend to splurge based on the suggestions of the sales people about a supposedly "marked down" item. Another characteristic is confirmation bias where consumers have established notions of what they want in a product or service. This often works to a merchant's advantage as they can pander to those biases in order to draw and retain customers.

Thinking on the fly is also what drove a a 3 level pricing model the Economist briefly (and successfully) used. As Duke professor Dan Ariely explains the newspaper had an offer for new subscribers to choose one of 3 subscription options: $59 for digital, $125 for print or $125 for both print and digital. The print only offer seems to make no sense but it did serve to drive more new subscribers to choose the more expensive option rather than the considerably cheaper digital, a medium that is generally far more popular.

In the preceding example with the Economist, Ariely notes the expensive print offer only served to underscore the "attractiveness" of the combo with the publication reaping rich dividends as a consequence of lazy thinking . It is a surprisingly sparingly used tactic. Hotels could, for instance, on low occupancy days could use it to bundle room sales with restaurant offers; the latter being a notoriously poor draw in most hostelries.

Vijay is Chief Operating Officer and part-founder of Apple Core Hotels- a chain of 5 midtown Manhattan hotels offering value and comfort in the heart of the city. Member of the board of Directors - Hotel Association of New York.

Read Vijay's blog HERE

Advertise with ...[Click for More]

~ Important Notice ~
Articles appearing here contain copyright material. They are meant for your personal use and may not be reproduced or redistributed. While 4Hoteliers makes every effort to ensure accuracy, we can not be held responsible for the content nor the views expressed, which may not necessarily be those of either the original author or 4Hoteliers or its agents.

Learn more about DigiJames - in room technology
 Related Articles  (Click title to read)
An Incentive for an Incentive: Convincing Consumers to Skip OTAs.
Employee Selection: Hard to Spot Soft Skills.
The Digital Direction Part 1: Fundamentals of Digital Marketing and Why it is Vital Hotels Understand.
SIX Essential Tips for a Successful Mobile Strategy for Hotels (Infographic).
 Latest News  (Click title to read article)
Amadeus integrates UnionPay into the payment platform
Thursday, 28th August 2014

New World takes over Manila Bay Hotel from Hyatt
Thursday, 28th August 2014

Lausanne named the world's top hospitality management school
Thursday, 28th August 2014

Travel and transport in relation to Ebola Virus Disease (EVD) outbreak
Thursday, 28th August 2014

Starwood expands presence in Thailand with the debut of Sheraton Samui Resort
Thursday, 28th August 2014
 Latest Articles  (Click title to read)
Optimizing Team Talent - What Fits Where
Thursday, 28th August 2014

Selecting A Hotel Management Company: A Decision Worth Millions
Thursday, 28th August 2014

Smart Software Solutions for Myanmar's Growing Hotel Industry
Thursday, 28th August 2014

Pictures Are Worth 1,000 Words (Especially on Social Media)
Wednesday, 27th August 2014

Understanding the 'Generations' of travel: The Generation Y / Millennials Part 5
Wednesday, 27th August 2014
 Most Read Articles  (Click title to read)
Global Update: Who's Where and Doing What - June 2014
5 Social Media Trends to Embrace this Year
Global Update: Who's Where and Doing What - May 2014
Marriott Offering Rewards Points for Social Media Posts
New HR Study: Candid Recruitment Experiences with LinkedIn

© Copyright 4Hoteliers 2001-2014 ~ unless stated otherwise, all rights reserved.
You can read more about 4Hoteliers and our company here

Use of this web site is subject to our
terms & conditions of service and privacy policy