In an artificially inflated market, don’t try to sell on price

25Jan11

Whenever I arrive at an airport, I go through the same charade: locate any bottled water in my bag, throw it away, go through the security screening, and buy a new bottled water inside the terminal. Since airports aren’t exactly the cheapest places to purchase things — especially items that you’re prohibited from bringing along — it comes as no surprise that bottled water is an expensive commodity.

Typically, obtaining a new bottled water at an airport store will run you $2.50, $3, or even $4. People accept this as a travel tax of sorts, and probably don’t think too much about it. However, the sales tactic that I saw during a recent trip really caught my attention. The airport store had a sign proclaiming that $3.29 was a great value for bottled water, since it was less than the airline charges for bottled water if you buy it on the plane. Now, I’ve never tried buying water on a plane, but something about this price comparison just rubbed me the wrong way.

A few days later, I realized why the “value” pitch bothered me so much. Promoting a product based on low prices is a sketchy approach when all the available products have artificially inflated pricing. In the case of water in airports, the government rules prohibit people from bringing water along, so the only places you can buy it are the airport stores and on the plane itself. This isn’t exactly the recipe for a competitive marketplace, and the high pricing reflects that.

In this type of market, retailers need to be careful about any messaging that puts too much emphasis on how much the item costs. By emphasizing price — even if one product is a good deal in a relative sense — you’re just reminding customers of how much they’re being ripped off. No matter how thirsty they might be, nobody enjoys paying $3 for a small bottle of water that costs $0.99 outside the airport, and anything that makes people think too much about the raw deal they’re getting is bound to hurt sales.



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