Why Customers desire Travel Discounts – series on discounts part 1

How do the insolvencies of Air Berlin, Thomas Cook or Tour Vital correlate with discounts? Well, they clearly show us the low-margin environment in which we operate and how close many companies in the tourism industry are to the brink of collapse. This aspect alone should be reason enough to handle discounts for customers extremely carefully. In this three-part series, Dr. Markus Heller, Managing Partner of the tourism consultancy Dr. Fried & Partner, attempts to answer the key questions surrounding this topic:

• Why do clients want a discount?
• How do we avoid discounts?
• When can discounts be useful?
• Why customers want a discount

It is not only in tourism that haggling over discounts is part of good manners: We buy cars with what is sometimes a decent discount, grocery stores lure us daily with discounts and special offers and in tourism, many suppliers still lure customers with “attractive” prices instead of emotions and added value. Against this background, it is helpful to first understand what actually drives customers when they ask for the ominous discount. Because if we understand what is behind this question, we are in a much better position to act than just react. By the way, the question of discounts does not only apply to end customers, i.e. travelers. In a modified form, the described motives also apply to the so-called B2B business, i.e. for professional hotel or flight buyers as well as for the purchase of IT systems or consulting services.

– The customer wants the best price as a matter of principle: Many travellers are aware of the price competition between service providers and tour operators and ask for discounts as a matter of principle in order to play off travel agents (whether online or stationary) against each other.
– It doesn’t cost anything to ask: A few percent always work – so the customer asks, even if the lowest price is not a decisive criterion for him.
– With a favourable booking price, more is left over for the holiday: don’t exceed the travel budget already at the time of booking and therefore see if you can’t get a little more for less.
– Justification before the (travel) partner: Every discount granted is a “victory” for the buyer and if the partner finds out about it, praise is certain.
– The travel budget is small: The customer is actually looking for the cheapest offer, but whether out of shame or calculation he does not name a budget. Finding the right travel price is certainly the biggest challenge in this case.
– Search for self-confirmation: Confirmation that you have booked the right thing and negotiated a great price – what more do people with a big ego want?
– Superiority: The customer knows better about offers on the market due to extensive internet research and wants to be rewarded for this “preliminary work” with a discount.
– Lack of conviction of the product: The customer is not enthusiastic about the holiday offer and “must” be convinced in a supposed way with a favourable price.

Interesting in this context is the differentiation between discount hunters and smart shoppers. Here, the latter differ in that they are not simply looking for a price reduction, but have the goal of “more value for less money” in mind. For example, the advertising agency Grey already showed in the early 2000s that discount seekers tend to look for offers in the lower price range, while smart shoppers want good quality at a reasonable price. As a consequence, this clientele is predestined for service offers with a good price-performance ratio. Here it is worth making a special effort as a seller, as there is often an above-average willingness to pay a higher than average price and valuable offers find their customers. The art for the seller is to make it clear to the prospective buyer that the “value” (i.e. the value of the service) is higher than the price of the offer.

Is the price really the deciding factor in a purchase?

As the list of discount motives shows, there are a variety of reasons for demanding discounts. But even at first glance, it is clear that only a part of them are really decisive for buying: Whether it is the lack of self-confidence, a big ego or the discount question without any real background – with sovereignty, humour or simple product arguments, these can often be easily overcome without the seller or buyer losing face. For the somewhat trickier motives, on the other hand, it is important to start earlier in the communication process with the customer. We will deal with this in our next article and try to give an answer to the question: “How do we avoid discounts”?

The corresponding publication of the series can be found in the trade journal Reisevor9.