From Latte to Budget airlines

Recently I went for 6 days to Poland and took flight on Wizzair (a budget airline). When on the flight and pondering on how they cut costs and make flights that cheap (compared to the regular airlines) I came up with the following analogy:

Latte is to regular airlines as regular coffee is to budget airlines

Makes sense right? Well if it doesn’t I give you an explanation. When you buy a Latte you don’t just get coffee and milk mixed up, you get more. The milk goes through a special process, when given to you it looks nice (with a heart figure), tastes differently and looks more complex. However if you look at the ingredients is just coffee and milk, same happens with regular airlines. In essence you get to reserve a seat in a plane, they take your luggage (and you) from one point to another. However is not just that, you get nice service, complementary drinks, stuff for your kids, 2 pieces of luggage per passenger, etc. In contrast budget airlines, just move you from one point to another. If you take luggage (other than the one in the hand) you pay for it, want extra leg room pay for it, there is no seat assignment just a reservation and any complementary drinks or nuts, your right, you have to pay for it.

The interesting thing is the shift during time, first we had regular coffee and regular airlines and then we had some shifts in how we saw things, thanks to culture, trends and unfortunate events. The act of drinking coffee became more than drinking a hot beverage, became a statement. The Mocha, the Latte, the cappuccino, all started to say a lot of the individual, even if it didn’t cost much to add that extra to the coffee and turn it into different alter egos (Latte, Mocha, etc.), still coffee shops started to charge almost double for it.

The practice describe of charging a high price for “pimped” coffee is called practice is called price discrimination.  Regular airlines have been doing this for a while, that is why first class is so good and economic is so uncomfortable, if not they will not be able to charge the high prices for first class (a make a really good profit of it). But in this age of budget airlines and high oil prices, people want to travel as cheap as possible. So instead of shifting from basic to “pimped” like was the case of coffee, air transportation shifted from regular (or pimpled) to budget, cheap (or un pimped.)

All this is important for customer to understand, that will help them not be tempted or take better decisions when buying a product or service. In the case of business, well if done right they could find a group of customers that will buy their “pimped” product/service at price that has high return.