In last week’s column, Josiah shared some insights about the shows we watched during our family vacation in the US, where he discussed the development of new market spaces and evolution in the circus entertainment industry from the Barnum and Bailey traditional shows, to the more sophisticated Cirque du Soleil, to the adult-themed Absinthe which catered to different target markets. We noted how prices of the tickets were clear indicators of demand and costs, just as there are so-called tourist traps where people are only willing to spend money on outrageous or overpriced stuff, all in the spirit of a well-deserved vacation.  
 
For travelers, the pricing issues start from the time the airlines are chosen – like which has the cheapest rate for direct flights, or which airlines include free checked-in luggage.  We tried Southwest Airlines for the domestic legs of our vacation and we were pleased about the “2 free luggages per passenger” offer, but were not quite used to the “no assigned seats” policy. Since there were 6 of us traveling, the chances of being seated together was diminished when we were in group B numbers 55 and up. I thought I had checked in early enough online from the hotel and group B was “safe” to get good seats together but I was mistaken. Later on, I learned to check in earlier via mobile phone and to just print out the boarding pass at the airport. Was I willing to pay for the early-bird check-in so I can get Group A numbers 1-15 at US$12.50 for peace of mind and less stress? Maybe for long trips or if I were traveling solo and had no access to the internet for online check-in. Will I fly Southwest Airlines again despite the ‘free seating’ concept? Yes -- with the free luggage, free snacks and refreshments, as well as the funny flight attendant we got from Orlando to Nashville, I can say it was worth the minimal stress from the possibility of being seated separately or in middle seats.
 
Buying tickets for theme parks posed different challenges too, as one needs to sift through several options that would best meet needs and budget. For example: do we get a park-hopper at Disneyworld which would entitle the ticket holder to move from one park to another in one day, or do we stick to the cheaper one-park per day since you can’t really finish all the rides and parades in one park anyway? Disney has a one day base ticket price (one park per day) and if you want, you can add on the cost of the park-hopper option, which is a substantial $40 add-on per person. We decided to pay for the base ticket on day 1 to see Magic Kingdom and to get the park-hopper on day 2 so we can visit both Disney Studios and Epcot. The rates get lower if you spend 3 or 4 days in Disney. The same option was available for Universal Studios and Islands of Adventure (where Harry Potter is) and since we like to be very leisurely in our vacation, we decided to just stay in one park one day at a time. Of course, different customers have different needs and some people, especially tourists with limited time may opt to get the park-hopper option just to be able to see all parks by being there as soon as the parks open and staying there until midnight, then the $40 add-on may be worth the price. In the Universal theme parks, the Fast Pass option (a ride reservation system that avoids long queuing time) is bought separately compared to the Disney tickets which already include the Fast Pass.
 
According to Hamilton, Srivastava and Abraham (2010), “price partitioning - the manner in which a total price is divided into components” will affect 1) customers’ price perceptions, 2)  their willingness to purchase and 3) their likelihood of buying again from the same vendor.  The authors do suggest that while keeping pricing simple may be more effective (think 99 cents for iTunes as a no-brainer), managers need to decide when cost should be offered separately or when to offer just one price with the bundled component offered as “free”.  These decisions will have to take into consideration customer sensitivity to the prices of the different components (like if the Fast Pass or free luggage are important), if the cost of that component is something the company can control and if that component is critical to customer satisfaction.
 
Chiqui Escareal-Go is the CEO and Chief Service Strategist of Mansmith and Fielders, Inc. For inquiries, please email info@mansmith.netor call (02) 584-5858 or (02) 412-0034.