A Brief Reflection on Pricing Strategy After Being Seduced by $42 Plane Tickets
Entrepreneur Office Hours - Issue #240
I just booked a flight for my mother in Atlanta to come visit me in Durham. It was a great reminder of the way pricing manipulates consumer perceptions and decision-making.
To book my mom’s flight, I went to Kayak and entered my desired dates and destinations. Within seconds, I had a bunch of options, but the cheapest, by far, was from Frontier. The flight was a direct flight for only $42 roundtrip.
For those who don’t know, Frontier Airlines is what’s called an “ultra low cost carrier.” It basically means they charge as little as possible for the flights themselves and then charge fees for everything else: seat choices, baggage, food, drinks, and probably oxygen. This allows them to show an incredibly low price during the advertising part of their customer acquisition funnel, but they can still make lots more money on the booking process as consumers mindlessly wrack up fees.
In other words, I shouldn’t have been surprised by the price, but… well… how could you not be? When you’re used to spending hundreds or even thousands of dollars on plane tickets, finding a perfect flight for $42 seems like something out of 1970.
However, as I began booking the ticket, I quickly realized the baggage fees would be nearly 3x the price of the tickets.
The next option on my list of flights was via Delta. The timing was basically the same for the flights, but the Delta flight cost $100 more. It had initially seemed like a worse deal until I realized it included luggage, meaning Frontier with luggage fees was actually more expensive than Delta’s original pricing.
Naturally, I chose Delta, but here’s the crazy thing and the reason I’m telling this story: Even though, intellectually, I understood Delta was the better choice, I couldn’t help but feel like Frontier was the amazing bargain and I was somehow being an idiot.
Think carefully about that for a moment because, at the heart of the story I’ve just shared, is they key to a successful pricing strategy. Successfully pricing products isn’t about choosing some magic number that’ll be the perfect balance of sounding reasonable to customers while making you enough money to stop eating Ramen. Instead, your pricing strategy is part of your customer’s experience. That’s why you need to learn to treat it less like a calculation and more like a defining factor in how your customer will ultimately make a decision about whether or not to buy.
-Aaron
This week’s new articles…
Forget Being Visionary Leaders — Here Are 10 Mundane Skills Entrepreneurs Actually Need
The work of startup founders often gets romanticized, but the most valuable skills in entrepreneurship aren’t nearly as exciting as most people think.
The Biological Reason Startups Are Hard
Every entrepreneur knows startups are hard, but they aren’t hard for the reasons most founders think they’re struggling with.
Office Hours Q&A
———————
QUESTION:
How do the psychological challenges of launching a startup differ across various stages of the entrepreneurial journey, and what are the unique challenges faced at each stage?
- “FeDev”
----------
This question was asked in the comments section of one of my articles, and I thought it was worth answering here. After all, it’s always fun to dig into the emotional and psychological rollercoaster that is entrepreneurship!
Obviously, each stage of the startup journey brings its own set of unexpected challenges, triumphs, and trials, and it’s good to spend time proactively thinking about those things since it’ll help you manage overall expectations and mental health more effectively during your entrepreneurial journey.
Let’s explore what those stages are and what you can expect:
1. The Idea Stage: Dreaming and Doubting At the very beginning, during the idea stage, you’ll probably feel a strong mixture of excitement and self-doubt. The psychological challenge here primarily revolves around the fear of the unknown and the fear of failure. Entrepreneurs might ask themselves: "Is my idea good enough?" "Has it been done before?" "Can I really pull this off?" And so on. This stage requires immense self-belief and the ability to push through doubt and criticism, sometimes even from within. Also, it requires a lot of ignorance. As the old saying goes, “ignorance is bliss,” and the less you understand about the challenges you’re about to face, the better.
2. The Launch Stage: Stress and Stamina In the launch stage, the challenges become more about stress management and stamina. This is where the idea moves into execution, and the workload will start to feel overwhelming. Yes, there’s a real risk of burnout during this phase as founders juggle product development, marketing, customer acquisition, securing funding, and so much more. The key psychological challenge is maintaining resilience, managing stress, and not letting setbacks derail the overall mission. Plus… this is when you’ll need to learn how to take meaningful breaks. You won’t want to, but you’ll need them.
3. The Growth Stage: Scaling and Skepticism As a startup enters its growth stage, the challenges shift towards scaling the business and dealing with skepticism, both from outside and inside the organization. Increasingly, you’ll have to deal with doubts about whether the business can sustain its growth, or evolve with the market. To combat these things, entrepreneurs need to manage their own expectations, maintain confidence in their vision, and navigate the complexities of expanding a team and entering new markets. Also, get ready to make the shift from “do-er” to “manager.” It’s a tricky change in responsibilities, expectations, and workloads, and most entrepreneurs suck at it.
4. The Maturity Stage: Complacency and Continuity Finally, in the maturity stage, the psychological challenges often include combating complacency and finding new ways to innovate in order to stay relevant. There’s also the emotional management of possibly preparing an exit strategy, whether that’s selling the business, merging, or taking it public. The challenge here is to keep the entrepreneurial spirit alive and to continue pushing boundaries. Alternately, the challenge might just be boredom. After all, if you enjoyed being an entrepreneur, you’ll likely find the relative stability of “success” to be surprisingly dull.
Got startup questions of your own? Reply to this email with whatever you want to know, and I’ll do my best to answer!
