OnDemand WTP Pricing Research

The Power of a Multi-Part Pricing Strategy | Strategic Pricing Solutions

Last week I ordered tickets to a spring training baseball game, and it was another demonstration of the power of multi-part pricing.  By that I mean the amount the customer ultimately pays includes multiple components, and they add up to more than the headline amount.  When we experience multi-part pricing, i.e., pay the extras, we often grumble about it.  However, we generally pay the extra fees and come back again, proving that multi-part pricing strategies can be very effective.

The baseball tickets were sold through Ticketmaster, who has an exclusive arrangement with Major League Baseball and many other entertainment providers.   I selected the best seats available for the game, and they were priced $32.00 each.  In addition to the face value of the tickets, I paid an Order Processing Fee and a Service Fee.  In total those fees added 19% to the price of my tickets.  Earlier in the month, I bought tickets to an upcoming concert, also through Ticketmaster.  The extra fees were an additional 14% above the price of the tickets.  Those extra fees obviously did not stop me from using Ticketmaster again.  If you want to learn more about the Ticketmaster process, listen to the Freakonomics podcast Why is the Live-Event Ticket Market So Screwed Up.

Sporting events and concerts are not the only users of multi-part pricing.  My most recent hotel bill included separate fees for State Tax, County Tax, City Tax, and State Cost Recovery Fee.  My most recent auto rental included six separate taxes and fees adding up to 55% of the base rental fee.  Although some of these add-on items are taxes imposed by the politicians, many of the fees are not.  They are just clever ways of increasing the total amount the customer pays while trying to avoid sticker shock.

There are two basic forms of multi-part pricing.  One is designed to present things to customers in a way less likely to trigger a price-sensitive reaction.  The second is designed to let customers segment themselves and choose the things they value most.  Add-on fees and fees for parking are examples of the first type.

Read complete article here:

The Power of a Multi-Part Pricing Strategy.