Sales Mastery
Published in

Sales Mastery

To be or not to be a Spirit Airlines business

The pros and cons of a low cost, tiered pricing model

There’s a pricing model that a lot of low-cost brands employ, and that model is something I call the Spirit Airlines model. In this pricing model, you sell your core product at the lowest price, stripped of typical amenities.

Under this Spirit Airlines model, if we take a flight as an example — you sell the flight at a base price removed of all (usually) inclusive features such as taking a carry-on bag, seat selection, in-flight snacks, WiFi, cancellation and exchange abilities, a comfortable seat, arriving on time, and more.

This model is great for one-type of customer and one only — the customer who is looking for deep savings and willing to make comfort and flexibility sacrifices in exchange. Outside of this customer archetype, this pricing model pisses off a lot of customers because no one likes buying a flight for a “steal” only to realize that it didn’t include a carry-on bag for their trip, which almost everyone needs.

This barebones pricing model also leads to skinny customer service support. Have you ever tried to call Spirit Airlines or Frontier’s customer service lines to remedy a problem? It’s legitimately one of the worst experiences you can encounter over the phone. This pricing model works best for people that have maximum flexibility and zero expectations.

For the entrepreneur looking to pursue opportunity, this pricing model is attractive because you’re able to become price competitive pretty easily. For those who prioritize customer satisfaction, this model isn’t as luring.

Employing a Spirit Airlines pricing model requires tact and is made for a very specific type of customer. In order to utilize it successfully, you must be aware of the pros and cons of your business model and play up the pros to your benefit.

Cons

A big con of running a low-cost pricing model is that you are in constant sales mode.

I know a business that uses this model to structure their services, and on top of the deliverables they’re managing for their clients, every other email is a sales email about some additional fee the client would need to pay in order to receive what they’re asking for.

This is exhausting when every other email is an invoice on top of the monthly invoice they’re already paying. It makes a client feel undervalued and stewards a more transactional relationship rather than a long-lasting one.

This leads to a reality where although you’re price competitive, you’re not customer-satisfaction competitive. Most customers only want to be sold to once. Having to revisit that sales experience multiple times feels like a relentless confrontation with their bank balance.

A business model that’s constantly reminding customers how much money they’re losing probably has more cons than pros.

When you’re not customer-satisfaction forward, this leads to drop-offs. You have fewer returning customers than a business that focuses on delighting customers. This leads to higher attrition rates and higher customer lifetime value costs.

In order for this pricing model to work, you need to be relentlessly (with no breaks) pumping customers through your doors at a high volume in order to reduce the lifetime value cost per customer. So, if you’re employing this pricing model for a low volume of customers, it’s likely that you’re not being as efficient with your customer acquisition costs.

Pros

When your products or services are priced super low, you become a price-competitive entry product. Young or new customer types will love your low prices and dip their toes in your industry through your introduction. This leads to the possibility of hitting a high volume of “entry” customers quite easily due to the low barrier of entry that you provide.

With less price friction, you have the benefit of constantly having a steady stream of customers coming through your door. So instead of the usual problem that most new businesses have of not having enough customers, you have the happy problem of having too many customers.

The Happy Medium

The happy medium when employing a low-cost pricing model is to understand the cons of this model and tweaking your business to improve on them.

If your customers get annoyed by your constant up-selling for additional services, how can you introduce these add-ons during the initial sales process to minimize constant sales talks later?

If you want to remain low-cost but focus on retaining your customers rather than welcoming the typical high attrition of these models, how can you ramp up customer service and satisfaction-friendly policies to keep your customers happy, and possibly turn them into returning customers?

Do you have a healthy business or does it need a tune-up? Grab my free checklist to find out.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Sophia Sunwoo

Sophia Sunwoo

1.5K Followers

I create moneymaking brands with womxn entrepreneurs who refuse to settle for mediocre. www.ascent-strategy.com