AAgent
Topic Author
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Why Not Use The Magical $0.99?

Sat Jan 29, 2005 12:00 am

Although it is clear that airlines would like to charge an extra $10.00 fuel surcharge, it is also clear that bookings drop when they attempt to do so. The resulting decrease in revenue realized from fewer bookings more than offsets the additional revenues generated by those passengers who do pay the additional charge. Further, it would appear that a large number of passengers are extremely price sensitive. They will take a $199.00 fare on a Brand-X airline vs. a $209.00 fare on a reputable carrier. This brings me to my real question. Why not use the powerful number used by retailers...the magical $0.99? I cannot personally recall seeing a fare advertised with the $0.99 as the final two digits. (Please note that I am not saying that it NEVER happens, it's just that in my observation it would appear to be extremely uncommon.) For example, as opposed to a $199.00 fare, advertise a $199.99 fare. To the shopping passenger, the chump change will go largely unnoticed and I suspect will result in few, if any lost bookings. However, when you multiply the $0.99 by millions of bookings the chump change results in millions of dollars being added to the bottom line. That sounds like a good thing...especially in tough economic times when every penny counts. Why then do we not see the magical $0.99 included in fares more often?

Regards,
AAgent
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SHUPirate1
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RE: Why Not Use The Magical $0.99?

Sat Jan 29, 2005 12:06 am

AAgent-BRILLIANT idea. That idea is especially brilliant when you consider that, for the most part, the search engines round everything to the lower dollar when it comes to sorting fares by price. Brilliant idea.

Welcome to my respected users list, and if I ever become the CEO of American Airlines (god help the Metroplex and Caribbean), consider yourself hired as my COO!
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Falcon84
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RE: Why Not Use The Magical $0.99?

Sat Jan 29, 2005 12:09 am

Interesting concept. I don't know if it would work as well on higher-priced items like an airline ticket, but damned if it doesn't have a subliminal effect when buying gasoline or the like.

Interesting.
Work Right, Fly Hard
 
atrude777
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RE: Why Not Use The Magical $0.99?

Sat Jan 29, 2005 12:15 am

I dont get it. People like me though are smart enough to know that 199 is cheaper then 199.99, when i see MORE numbers I think wow, more expensive, maybe im the few who think different. But if they are really price sensitive, they will go hey the fare went up 99 cents! I hate when they have the 99 cents at the end, it makes it MORE confusing to me. just round up or down to the neartest dollar I'd think. I guess im not just getting it.

Alex
Good things come to those who wait, better things come to those who go AFTER it!
 
AAgent
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RE: Why Not Use The Magical $0.99?

Sat Jan 29, 2005 12:15 am

SHUPirate1,

I look forward to working with you at AMR headquarters!

Regards,
AAgent
War Eagle!
 
Falcon84
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RE: Why Not Use The Magical $0.99?

Sat Jan 29, 2005 12:31 am

SHUPirate1,

I look forward to working with you at AMR headquarters!

Regards,
AAgent


AA will be holding a press conference later today to announce this strategic change in management.  Laugh out loud
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usflyer msp
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RE: Why Not Use The Magical $0.99?

Sat Jan 29, 2005 12:47 am

I don't see the point either, because the average person does not see the base fare anyway. A 199.99 MSP-ORD-LAX would be $240.79 after taxes and fees, assuming the $199.99 includes the 7.5% transportation tax.

My .02

USFlyer MSP
 
SHUPirate1
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RE: Why Not Use The Magical $0.99?

Sat Jan 29, 2005 12:51 am

Falcon-I better get on a flight to DFW then, if I'm going to be able to attend my own press conference...anyway, here's my plan for American Airlines:

-Continue and accelerate the simplification of aircraft into hubs (ie. no 738's at ORD, no M80's at MIA)

-Put MRTC back into all aircraft, at 35 inches on the 777's, 767's, 738's, and M80's, and 33 inches on the AB6's and 757's

-Scale down ORD, to a more O&D focused airport, moving as much connecting traffic as possible to STL, as that 777 going to Heathrow should not be delayed at ORD so somebody can fly from Dubuque to Huntsville, through O'Hare

-Attempt to improve employee morale in any reasonable way possible, ideally leading to the decertification of the unions, and hopefully removing certain scope clauses (perhaps imbedded in the terms of the contract)

-Move American Connection out of STL, making all non-mainline flying American Eagle

-Move all ER3 and ERD flying out of LGA and BOS, and all ERD and ER4 flying out of ORD, in the meantime acquiring more CR7's that would make the aircraft the smallest aircraft flown at ORD and the ER4 the smallest at LGA (the slot rules prevent use of larger aircraft for regional flights) and BOS

-Acquire the Saabs from Chicago Express, primarily for use at STL

-Place an order for 7E7-3's, to create a long-range plan to remove the AB6's from the fleet, for commonality reasons

-Find other ways to improve unit revenue, ideally as little as possible at the expense of unit cost, and streamline operations

This is all in the first couple of weeks as CEO.

[Edited 2005-01-28 17:13:11]
Burma's constitutional referendum options: A. Yes, B. Go to Insein Prison!
 
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HAWK21M
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RE: Why Not Use The Magical $0.99?

Sat Jan 29, 2005 12:55 am

AA will be holding a press conference later today to announce this strategic change in management.
Have you decided on your Mx Chief yet  Wink/being sarcastic
regds
MEL

[Edited 2005-01-28 16:55:46]
I may not win often, but I damn well never lose!!! ;)
 
flyabunch
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RE: Why Not Use The Magical $0.99?

Sat Jan 29, 2005 12:59 am

This has probably been discussed, although I cannot remember seeing it and a search did not reveal it, why does the airline industry always show their loaded prices rather than their net prices? By loaded, I mean with all the taxes, etc.

If they only showed the price that they have control over then they could use the magical $.99 to their advantage. Taxes and fees defeat the idea.

Also, if they only showed the price that they have control over, then the changes in security, airport fees, etc. would not be such a dreaded event. I refer to the present proposal to raise security fees by a couple of bucks. The airlines are all worried it will have a negative effect on them. It wouldn't if they did not show it until the end of the buying process.

When you buy goods in stores, or buy a car, or any other item I can think of, the tax is added on after. Why not airline tickets?

Mike
 
danialanwar
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RE: Why Not Use The Magical $0.99?

Sat Jan 29, 2005 1:06 am

AirAsia in Malaysia does that. They advertise their fares as RM0.99 (yes, they actually advertise one flight with that price), 9.99 etc ... but that is BEFORE taxes and surcharges
Best Business Class: Royal Brunei. Best Economy: Singapore Airlines. First: please send money first!
 
AAgent
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RE: Why Not Use The Magical $0.99?

Sat Jan 29, 2005 1:08 am

Flyabunch,

I couldn't agree more. Although it is important that the passenger know in advance about the taxes and fees added to the ticket, I think a fair starting point would be the airlines actual fare without all of the additional garbage already tacked on. They should be able to start with the base fare ($199.99 for example) and then add fees and taxes just as you would with most other types of transactions. Perhaps then the flying public would be made more aware of how the airport taxes, security fees, etcetera are really affecting their total ticket price.

Regards,
AAgent
War Eagle!
 
flyabunch
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RE: Why Not Use The Magical $0.99?

Sat Jan 29, 2005 1:15 am

AAgent,

Thanks for your input. I just booked two tickets this morning on line and the loaded price was shown all the way through the process. The only time it was broken out was at the end. I think they all do it backwards.

I do agree that people need to be aware of what the total would be and I heartily agree that if people saw how much the fees bump their tickets up instead of backing it out at the end, there would be more pressure on the government and the airports to reign in those costs. They represent a considerable amount of the ticket price.

Mike
 
petazulu
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RE: Why Not Use The Magical $0.99?

Sat Jan 29, 2005 1:15 am

Most travel websites round things to the nearest dollar right? Wouldn't that 199.99 fare just show up as $200?

I am also not sure the subliminal effect of '9' in the cents column has that big an effect on larger cost items. A car that costs $9999.99 is still the same as $10,000. Since these larger cost items tend to involve a more calculated buying decision- it is not an impulse buy- I would think that people would think long enough to realize the costs were the same.
 
AAgent
Topic Author
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RE: Why Not Use The Magical $0.99?

Sat Jan 29, 2005 1:21 am

Petazulu,

Regarding the rounding of the dollar, SHUPirate1 indicated that he believes that search engines tend to round DOWN to the nearest dollar. I don't have any information regarding this detail but I'm very interested to learn which is truly the most prevalent form of fare rounding on the internet, UP or DOWN?

Regards,
AAgent
War Eagle!
 
flyabunch
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RE: Why Not Use The Magical $0.99?

Sat Jan 29, 2005 1:21 am

Petazulu,

You would be surprised by all the marketing studies that back up the idea of the $0.99. I had a marketing professor in grad school who called it the "Rule of 99". He said it does not work on all people all the way up but it does work on a lot of people no matter what the price. Although fewer are going to fall for it at a high price point, it still has an impact on decisions.

Using your example, in similar circumstances, I have rounded off to the thousand and been corrected by people who said " oh no, its less than $10,000. Go figure.

Mike
 
elwood64151
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RE: Why Not Use The Magical $0.99?

Sat Jan 29, 2005 2:28 am

Since it is obvious that few of you have taken a Consumer Behavior class, I'll inform you that for high-dollar items (those over about $150), using the "magic $.99" doesn't work. High-dollar items sell better as whole numbers.

However, rounding off the dollar amount to, say, $149 instead of $150 does tend to work.

Also, having worked reservations for an airline that advertised the rates it had control over, I can tell you that people get absolutely PISSED when they find out there are additional taxes on the $29 each-way fare from MCI to MDW. Also, they tend to get upset to find out that the $29 is *not* the round trip fare (since they're stupid and don't pay attention like that).

Finally, $.99 is not as effective in the US as $.97. You'll notice at Wal-Mart that most prices end in $.77. That's because prices with the number seven in them tend to sell better. Possibly our fixation on 7 being a lucky number? It would seem so, since prices in Asia with the number 8 in them tend to sell better than any other, and in many parts of Asia, 8 is a lucky number.

At work, we have a generator that is on sale for $1,999. Right before the blizzard, when people could expect their power to go out, they didn't sell a-one! I have suggested numerous times that they lower it two dollars to $1,997, but they won't listen to me...
Those who fail to learn history are doomed to repeat it in summer school.
 
AAgent
Topic Author
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RE: Why Not Use The Magical $0.99?

Sat Jan 29, 2005 2:38 am

Elwood64151,

The $0.99 figure itself was used in this example as it among the most common of examples where retailers attempt to drag additional money out of your pocket without you refusing to buy. Of course, any additional income whether it be $0.99 or $0.49 per ticket would be welcome. After all, if you sell 10 million tickets at an additional $0.49, that's an impressive $4,900,000.00 you've just added to your revenue stream.

Regards,
AAgent
War Eagle!
 
SHUPirate1
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RE: Why Not Use The Magical $0.99?

Sat Jan 29, 2005 2:50 am

How about the business plan? BTW, here's a couple more things, the first one for immediate institution, the others for long-range goals:

-Provide reasonable compensation (ie. hotels, meals) for all inconvenienced passengers, for whatever reason

Long-term plans:

-Add the regional gates back into the JFK project

-Build a new terminal at BOS, with FIS facilities, and convert Boston and New York-Kennedy into the major transatlantic gateways

-Build a new terminal at SJC, with FIS facilities, and turn SJC into the Pacific hub

-Purchase 7E7-8's, to expand and eventually replace the 767's to Europe and South America, and to expand in Asia

-Work with Boeing for a short-range, high-cycle aircraft to eventually replace the MD-80

-Have Executive Air purchase the Q-400 turboprop to eventually replace the ATR-72 on the Caribbean routes from Miami and San Juan
Burma's constitutional referendum options: A. Yes, B. Go to Insein Prison!
 
Jaspike
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RE: Why Not Use The Magical $0.99?

Sat Jan 29, 2005 3:09 am

It wouldn't be a new thing if airlines did advertise more with .99 fares, just look at these.... (bargains)  Smile

Ryanair
Doncaster(Sheffield) € 0.49 (!)
Ancona £0.99
Shannon £0.99
Pisa (Florence) £0.99
Venice (Treviso) £1.99
Düsseldorf(Weeze) £0.99
Girona (Barcelona) £1.99
etc. etc.

Thomsonfly
Bournemouth from £17.99
Doncaster Sheffield from £15.99
Coventry from £13.99

I'm not sure which is more attractive to most customers: £24 / £24.99. For me, the one without the .99 seems better - though .99 seems to work well for Ryanair. But, with some fares (e.g.... Ryanair), you need a .99, or even a .49  Big thumbs up

Tom
 
ltbewr
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RE: Why Not Use The Magical $0.99?

Sat Jan 29, 2005 4:35 am

Ad pre taxes/fees pricing for airline tickets is better if uses the fewest number of numbers. $29 or $149 looks 'smaller' than $29.99 or $149.99 doesn't it? Also means that number is easier to remember, you have it in larger print to get attention and takes up less room or mention in a radio commercial. Also, airline tickets are not something one buys in a store like a Wal-mart, and are rarely paid in cash (unless you want the dreded SSSSS tag on your boarding card!). Don't forget one of the orgins of '9' or '99' pricing. In the USA in the later 1800's this was to make sure people had a penny or 2 to buy the newspapers of the time that the stores advertsed in.
 
FLY2LIM
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RE: Why Not Use The Magical $0.99?

Sat Jan 29, 2005 4:47 am

After seeing SHUPirate1's "strategy" for AA, I am starting to think that Arpey is the perfect man for the job. I'm afraid Pirate would finish the job and drive AA straight to liquidation.  Smile
FLY2LIM
Faucett. La primera linea aerea del Peru.
 
SHUPirate1
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RE: Why Not Use The Magical $0.99?

Sat Jan 29, 2005 4:53 am

FLY2LIM-Get it right, it's not a strategy, it's a strategic vision. Big grin

In all seriousness though, what I can't understand is why these airlines will announce their pulldown of their hubs and operational streamlining for three to four months in advance. If you're going to do it to save money, by all means, don't wait that long, just do it.
Burma's constitutional referendum options: A. Yes, B. Go to Insein Prison!
 
FLY2LIM
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RE: Why Not Use The Magical $0.99?

Sat Jan 29, 2005 4:55 am

SHUPirate1:
It's good to see that someone on a.net has a sense of humor.
Operational streamlining sounds good, but it takes time, from what I understand.
FLY2LIM
Faucett. La primera linea aerea del Peru.
 
AAgent
Topic Author
Posts: 540
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RE: Why Not Use The Magical $0.99?

Sat Jan 29, 2005 5:07 am

Ltbewr,

Perhaps my suggestion is a bit unclear. I'm not necessarily suggesting a big print ad or radio promotion of these fares. I'm not even suggesting that the fares should be considered special at all. The fares just need to be LESS than one dollar more than your competitor's. People will actually book a less preferred carrier to save $10.00, but I honestly do not believe that a huge number of them would take the less preferred carrier when the price difference is no greater than $0.99. Sure, there'll be a penny pincher or two in the bunch, but overwhelmingly people would gladly pay the extra pocket change to fly their carrier of choice. That's just my $0.02 on the matter...or is that $0.99?

Regards,
AAgent
War Eagle!

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