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Why using customer wealth data is a tricky business | EyeforTravel

A recent Travel Weekly article suggested that travel suppliers could productively use customers’ personal wealth data to ‘price dynamically’. Most readers assumed the worst: travel suppliers could use individual financial information to exploit less price sensitive customers by extracting higher prices from wealthy customers. ‘Deals’ would only apply to customers who might not be able to afford the standard fares. Many readers were outraged.

Of course, this is not a winning strategy for any travel supplier. In fact, ‘productive’ use of individual wealth actually means helping customers – wealthy and not-so-wealthy – make travel more comfortable and design the entire travel experience in a way that better meets individual needs.

But take note: a customer’s wealth should be used with extreme caution for setting higher fares or fees.

Of course, basic economic theory might suggest that wealthier customers would likely be less price elastic with respect to many goods and services – isn’t that why many purchase those Mercedes automobiles and stay at the Ritz? In practice, however, differential price elasticity among customer segments is far more complex. And generalisations are dangerous! American business magnate Warren Buffett, in fact, famously prefers a modest lifestyle. Indeed, one could actually argue that customers who are less wealthy may travel less and may not be as astute in investigating fares or rates; as such, they may not efficiently compare prices across hotels or flights and may actually be less price sensitive!

A wealthy customer, like all customers, generally focuses on the variance in pricing among alternatives. They purchase a Mercedes only if they perceive it has value relative to a lower-priced option. Any supplier that prices his product without regard for the alternatives, that charges a price premium that is not associated with a better product attributes, will lose customers, whether wealthy or not. For this reason, charging higher fares based strictly on a customer’s wealth do not make sense for travel suppliers.

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Why using customer wealth data is a tricky business | Travel Industry News & Conferences – EyeforTravel testing.

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