Smarter Pricing: How to capture more value in your market

End confusion, risk a price war

In spring 1992, American Airlines interpreted market research showing customer dissatisfaction with confusing flight prices as an opportunity to lead the travel industry into a new era of simplified fares. Chief Executive Bob Crandall launched ‘Value pricing’ on 29 April 1992. Fares were made easy to understand with only four fare levels: First, Regular coach, Discount coach (seven days in advance) and Discount coach (21 days in advance). Customers responded positively. Competitors were threatened. The book Power Pricing by Dolan and Simon tells the story of the competitive response. Major rivals, Delta and United Airlines matched prices immediately. Smaller airlines took their prices lower and on 26 May, North ...