Recently, Spirit Airlines announced that they will start charging $45 for carry-on luggage. Fees for check-in bags made more people avoid check-ins and prefer to carry-on their stuff. Now they are irate over fees for carry-ons announced by Spirit. Even US Senate is taking up the issue, thinking that Airlines are using this to dodge taxes they pay on ticket prices.
I can’t help but wonder whether things would be different if airlines chose a different tack: give discount to light travelers instead of fees for bags. Effectively, it should be the same – people with bags pay more than those without, but human nature will see it differently. Travel light and get a voucher for $45 towards your next flight. It may even increase loyalty among the ideal demographic due to this voucher they need to use. Airlines could give you frequent flier miles as well for not bringing any carry-on luggage. Customers will view the discount more favorably than the fee (numerous studies have been done by economists proving this point).
This is similar to failed attempt by Coke to have smart vending machines that increased prices during hot days. It failed, since people saw it as profiteering. However, if Coke just reduced prices on colder days, there would no outrage.
Simply raising the prices on everyone and then discounting has its own downside. Unless the lower effective price is what customers associate with the product (instead of higher initial price), competitor will steal some price-sensitive customers, based on this perception.
Strategy, Marketing, Orthogonal thinking, Newton's law 