China pricing strategies – cash in on desperation

Last month, sudden snow falls across China caused havoc to the airline schedules and gummed up countless airports. But the smart ones don’t let that hit their profits… Here’s a case study for you MBA types (we know you just love case studies) from Xi’an Airport Coffee Shop.Large numbers of passengers arrive at the airport, after having checked out of their hotels, only to find that their flights are delayed by up to 12 hours due to the weather (thanks a lot Weather Modification Bureau).

The airlines apologise, but offer nothing in the way of compensation – not a food coupon or a hotel voucher in sight. So, the (by now resigned to their fate) passengers retire to the airport coffee shop and buy themselves a smallish cup of tepid and distasteful coffee in an attempt to keep their spirits up faced with a long wait. The coffee arrives, suitably diminutive, typically tepid and priced at RMB38 per cup. They grin and bear it – Chinese airport catering facilities are hardly the spot for bargain hunting.

After four hours of dozing and smoking, they go back to the coffee shop to try and pass another hour. They order the same tepid cup of coffee. The bill arrives – RMB58 per cup.Four hours later on and they can think of nothing else to do but return for a third cup of coffee to keep themselves awake and for something to do (it’s now ten hours since their flight should have left). They order the coffee – it’s just as small and just as tepid but this time its RMB78.

So, there you have desperation pricing in action. Keep the customer hanging around with nothing to do and within eight hours the price can more than double!!! At least one coffee shop in China is hoping for a long and very white Christmas!!


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