Tag Archives: consumer behavior

Economics of Airline Class Seating

Plane fares are frustrating. From the time someone searches for a flight in the morning, until they book it later in the week (or day), the price changes. And don’t even get started about how little leg-room and seat space there is in the economy class section! But then again, the economy class is not how airlines make money. How does an airline make money on fares?

First class and premium cabin seats!

Here is an example of a flight’s pricing: British Airways 777, round-trip, non-stop between London and Wash. D.C.

  • 224 seats total
  • 122 economy seats @ $876/seat = $106,872
  • 40 premium economy seats @ $2,633/seat = $105,320
  • 48 business class seats @ $6,723/seat = $322,704
  • 14 first class seats @ $8,715/seat = $122,010

The front sections of the plane account for 45% of the seats, but generate 84% of the revenue! While this model does not always hold true, in general airlines get 66% of revenue from the premium, business, and first-class seats.

In essence, airlines are able to sell the same service (transportation) to different people, at vastly different prices (enhanced amenities and the onboard experience). Airlines realized that passengers could be segmented into two categories: tourists, and business people.

What else will future air travel hold?

Group Activities and Discussion Questions:

  1. Pricing is usually a complex topic. Discuss the six steps for pricing (determining objectives, estimating demand, determining cost/profit relationships, select price level, set list price, and make adjustments).
  2. Discuss the various pricing models in class: demand-oriented, cost-oriented, profit-oriented, and competition-oriented.
  1. Show this video that explains the basic economics of airfare:
  2. https://youtu.be/BzB5xtGGsTc
  3. Draw the price structure on the board.
  4. Divide students into teams. Have each team work on a possible re-design of planes to address more market segments.

Source: Wendover Productions, YouTube

Leave a comment

Filed under Classroom Activities

Fender Teaches Guitar Online

While not everyone is a musician, many other people have longed to learn a musical instrument. Some people do learn, but many others stop learning and playing way too soon. According to research from Fender Guitars, 45% of guitar sales are generated by people who have never used one before – but 95% of people who try guitar give it up in the first year. That dramatically lowers overall industry sales, and gives Fender an opportunity.

Fender Guitar has a new plan to help people learn how to play classics such as The Star Spangled Banner and  other songs. The key is to get future guitarists engaged quickly. The Fender Play web site has a guided curriculum so that students can pick the style of music they want to learn, and then immediately get instruction on songs from that genre. Fender Play includes:

  • A guided learning path for your musical style
  • Hundreds of lessons
  • High quality, close-up videos
  • New songs and lessons added regularly
  • Artists such as Foo Fighters, Elvis, U2, The Lumineers, and more

The service starts with a free 30-day trial period, followed by a  fee of $19.99 per month. Fender Play is not limited to its own guitar players. Any guitar student can learn to play on their own instrument (but, of course Fender hopes to create future good will towards its company).

What are you waiting for? Pick up that six-string and go!

Group Activities and Discussion Questions:

  1. Poll students: Who plays guitar? Who used to play guitar? Who wants to play guitar? What keeps them from playing guitar?
  2. Show FenderPlay site: https://www.fender.com/play
  3. Optional: Additional videos to show:

https://youtu.be/h6ada1kvgEw

https://youtu.be/jnkppFj5Ri4

https://youtu.be/GSvQOodrEpA

https://youtu.be/T4lFt2JWrXk

  1. Discuss the four primary marketing strategies: market penetration, market development, product development, and diversification.
  2. Which strategy is Fender using for this product? Why?
  3. Divide students into teams. Have each team select one of the four different strategies and explain why that strategy could be used to market Fender guitars.
  4. Have each team determine the marketing mix (4Ps) to support their strategy choice.

Source:  Brandchannel.com

Leave a comment

Filed under Classroom Activities

Made in the USA?

It’s that patriotic time of year in the USA when citizens (and shoppers) show their support and pride in America. As could be expected, companies that advertise their patriotism can use it as a very effective marketing tool. After all, people want to be proud of their country and its accomplishments. But, what does it really mean when a company promotes its product as being “made in the USA?”

According to the Federal Trade Commission (FTC), if a product is advertised as “Made in the USA” then “all or virtually all” of the product must have been made in the U.S. But, what does “virtually all” mean?

Again, the FTC states that the product should contain no (or negligible) foreign content. This means that all significant parts and processing must be of U.S. origin and final processing must also take place in the U.S. (includes the 50 states, District of Columbia, and all U.S. territories and possessions). These rules also apply to products that might not explicitly claim “made in the USA,” but may use images or American flags or U.S. maps, such as stating “true American quality.”

Take a close look at companies that state “made in the USA” and make sure the claim in legitimate.

Group Activities and Discussion Questions:

  1. Poll students: What does it mean if a product advertises that it is made in America? What products make this claim?
  2. Show the FTC requirements: https://www.ftc.gov/tips-advice/business-center/guidance/complying-made-usa-standard and have students examine the requirements.
  3. Divide students into teams. Have each team search the Internet for products that claim to be “made in the USA” and examine if the claims are accurate.
  4. For products that do not make a full made in USA claim, what are other messages that could be made to clearly identify origins and processes?

Source:  Truth in Advertising

Leave a comment

Filed under Classroom Activities