Sunday, November 19, 2006
The Economist understands the importance of pricing from both a macro and a micro –economic perspective: “Shifts in prices are like the traffic lights of an economy” it says.
The article looks at how economists on both sides of the Atlantic are looking at the volatility of prices and the velocity of their change. For example, two of these economists, Bils and Klenow, have obtained 1995 – 1997 data for 350 items in the US Bureau of Labour CPI basket to calculate that these prices changed at least every four or five months.
Some other interesting findings:
* Sales account for 87% of changes in the price of clothes, 67% of furniture price changes and 58% of processed food price changes;
* Price changes in Europe tend to be bigger than in US (average increase of 8%, average decrease of 10%), and;
* High inflation leads shops to raise prices more often (now there’s a self-fulfilling prophesy if ever I heard one).
What the article does not explore, and which pricing professionals would be particularly interested in, is (a) the reasons for the price changes (competition, costs) and (b) what the impact of those changes was (revenue growth, market share objectives).
Nevertheless, this new wave of research (see sources at the bottom of The Economist story) adds to the work of Alan Blinder, his team, and their seminal 1998 book “Asking About Prices”
Saturday, November 18, 2006
When is a low-cost airline not a low cost airline? It seems to be a question being asked by many commentators and passengers these days. And why not? Here’s a list of just some of the ‘optional extra’s available from various airlines, both here in Australia and overseas…
- Business class lounges (pay-per-use)
- Seats with extra leg room
- Inflight entertainment (prices can vary by flight length)
- Light meal
- Single meal
- Full service meal
- Headphones for the inflight entertainment
- Portable video player (cheaper if booked in advance)
- Your baggage (also cheaper if booked in advance)
- Comfort kits (blankets, eyeshades, socks, inflatable neck support)
- Kids entertainment backpack (colouring book, pencils, stickers puzzle, soft toy & postcards)
Once you’ve selected your “optional extra’s” and possibly made your way to the out-of –town airport that the carrier uses, you may find you total costs are not that different from those offered by a full service airline out of a more convenient airport.
I’ve already speculated elsewhere on this blog that the day may one day come when a low cost airlines attempts to monetise the aircraft toilet. The other possibility is that the low costs airlines, sooner or later, go full circle and start bundling up all these optional extras, in the same way regulators around the world are increasingly demanding that airlines advertise airfares exclusive of taxes and surcharges.
Its a warm night and as I have the front door open, I can hear the music of U2 coming from the telephone company dome.
The finance ministers are less noisy.
I have no idea what it cost to attend tonights U2 concert. But I do know that 22 years ago, during their first tour to Australia in 1984, it only cost $19.90 to see them.