Title: Price Post (2 of 3): Less for the Same?

As airlines continue to search for ways to reduce costs and increase revenues while trying to maintain some level of positive customer satisfaction, Northwest Airlines is testing a program that charges passengers to check their luggage in curbside. As I read Liz Fedor’s article, several concepts that are covered in our reading and discussed in class came to mind.

It is interesting to observe that Northwest is testing this service in the Seattle market first rather than rolling it out to all of their customers at the same time. Hopefully this is part of their bigger marketing strategy (Principles of Marketing, Kotler & Armstrong, 11th Edition, Pg. 276, Figure 9.1) which has “Test Marketing” as a key step in the overall introduction of a new product or service. If the analysis of the data collected indicates a successful test, as defined by their research objectives, a decision will be made at the end of this summer concerning expansion of the program to other locations that they serve.

I think that it’s safe to say that Northwest isn’t rolling this program out as a new business unit; however, because the industry as a whole is paying particular attention to spending as both competition and fuel costs increase, this is another avenue to increase income without increasing spending. You can make the case that the customer is getting “less for the same.” (Principles of Marketing, Kotler & Armstrong, 11th Edition, Pg. 221) Previously, curbside check-in was part of the service and the cost to the passenger was the amount that he tipped the skycap. Now, ticket prices remain the same (relatively speaking) and an additional fee of the $2 per bag is added for a service that was previously included…definitely not a desirable attribute.

On that note, Northwest needs to be cognizant of the potential impact that initiating a price change (Principles of Marketing, Kotler & Armstrong, 11th Edition, Pg. 345) may bring. Because United Airlines is already charging for skycap service, Northwest may have been able to gather data on customer reaction to the new charge prior to moving ahead with their test…although it’s unlikely that we’ll see an increasing price war centered around skycap fees similar to the one that Jenny discusses in her blog.

In conclusion, I see the rationale for charging for the skycap service, but it’s seems like a band-aid fix.