On Cheaper Flights
Has this ever happened to you?
You’re looking up flights and see a wide range of prices and total travel time. Obviously you want to travel to and from Mexico (or insert any other desirable destination here!) with the fewest amount of stop-overs and the most comfortable seat possible, but you’re on a budget.
The direct flights on the reputable airlines are north of $1,200. Yikes!
The budget flights on an airline you’ve never heard of – with a stop-over or two – are around my budgeted price of $600.
So I’m thinking… I’m young, I do yoga… I’ll gladly sit in a tighter seat to save that extra money!
But wait, a little more research has found that for $80 more, I can reduce the stop-over time to only 2 hours. Actually, if I’m willing to pay about $90 more than that, I can travel on a Star Alliance airline and collect Aeroplan points, which helps me travel in the future. Oh my days! I’ve found a route where I can travel down there on a direct flight for only $150 more than that AND on Air Canada! Well that’ll get me to the beach like 5 hours earlier!
I’m so excited and I purchase my tickets. I’m travelling direct one way, getting in at a reasonable time on the return flight, and collecting Aeroplan points. And it was all only $920 altogether. YESSSSS!!
Wait. I only wanted to spend $600. And suddenly $920 feels like a deal.
HOW DID THIS HAPPEN?!?!
No, airlines and travel search engines don’t have Jedi mind-controlling powers. They simply take advantage of the way our brains work and a little phenomenon called Price Anchoring.
What is it and how do you get around it when booking flights? READ ON!
But First! A Mini Introduction to Behavioural Economics
In the beginning, Economists convinced us that when humans did anything, we did it perfectly, we were rational all the time, never made mistakes, and somehow had access to all the information in the world to make perfect decisions. But then this really smart guy named Herbert Simon (1955) noticed that although the economists had some good points about the rationality of our decision-making, it was limited, impacted by environmental factors and human characteristics. Cool. (Please note: lots of people throughout time – like Philosophers - noticed the imperfections of humans, but for some reason they don’t count).
Then finally it was noticed that not only are people NOT ALWAYS RATIONAL, but we tend to make systematic (i.e. consistent) mistakes. Behavioural economics is the study of these systematic errors… things that lead to biases and mistakes in decision-making. It is largely based on the study of heuristics – mental shortcuts (“rules of thumb”) that help us simplify complexity. Basically they help us get through our day, using this quick, intuitive, and automatic way of thinking.
We’ve all got a little Homer Simpsons in our brains
Friends… this stuff is so cool! It helps us answer questions like why we often opt for the second least-expensive wine on the menu, why we usually pick the middle option when choices are presented to us, how we spend our money (*ahem* including on airfare and travel stuff), and on and on and on!
We usually pick the middle option of those presented to us
Now let’s get to how this impacts how you book a flight.
Price Anchoring Can Be Used To Make Us Pay More
Price anchoring means that we get stuck on, or influenced by, numbers and options presented to us when making a decision. You see, we have a really hard time figuring out how much something is worth in a vacuum. Without similar products at other prices around, how would we know if something is relatively more or less expensive? Even the presentation of irrelevant numbers that have nothing to do with price – like spinning a prize wheel - can impact us, but for the purpose of explaining flight bookings, let’s just talk about seeing those prices that come up in the flight search.
The first piece of information we get tends to set the stage for what we think is an appropriate price. The anchoring comes from how we tend to rely too heavily on that initial piece of information to make subsequent judgements or decisions. One of the reasons that anchoring impacts what we think of as an appropriate price is called extremeness aversion. Extremeness aversion is the tendency to avoid extreme options and pick a middle one instead.
Let me give you an example. Take the above picture showing three bottles of wine. Let’s say you’re looking for a nice (but inexpensive) bottle of wine, and you see that at this store you could pay as much as €15. So that bottle at €10 doesn’t look so expensive anymore – and, hey! It probably drinks better than the €5.
What if you originally went into the store thinking wine would cost €25? But imagine seeing that bottle for €5 first, you’d probably say to yourself “no way am I paying a ton of money for wine if I could get some for as cheap as €5!!”
Our sense of what we think is reasonable to pay gets adjusted by the choices put in front of us. Our estimate of what’s reasonable is biased towards the anchor value, or the first piece of information we get. In our flight example, even in subsequent searches (i.e. looking at other flight options), we still confirm those newer prices against the anchor to see if the new prices coming up in the search are “reasonable”.
Some travel companies know that this is how we make decisions. Take this excerpt from a guide by Boxever and Skift:
““Most of the time, people are not sure what they should be spending, unless it’s matched up against similar offers. This is why you should never present a customer with just one choice.
Instead, present them with three choices, with the middle option being the choice you want to steer them toward. The idea here is that the middle option becomes favorable purely based on environment.””
Going back to my flight. I wouldn’t have known what was an expensive flight to Mexico or a cheap flight to Mexico without checking Google flights – because it’s all relative. If I hadn’t seen the flights for $1,200, maybe I would have stuck more closely to my budget and the original price of $600.
How To Fight Back Against Price Anchoring When Booking Flights
Don’t worry, we’ve got this. Here are a few suggestions that might help prevent you from being swayed.
1) Rank-Order Flight Options by Ascending Price
Typically, we want the best deal we can get (spend more of that money on experiences once we get to the destination, am I right?). Instead of letting the different flight prices come up willy-nilly and risking being anchored to a really expensive flight, let’s do the opposite and anchor ourselves to the cheapest options. Try rank-ordering flight options by price in your initial research.
2) Stay Accountable to Your Flight Budget
Can’t spend more than $X,000 on your flight? Keep yourself accountable by writing that number down and keeping it right under your nose while looking at flights. So you don’t get anchored to your price ceiling, I’d also suggest writing down your ideal price on that paper too. As long as your travel itinerary falls within that range, you’re good to go. Writing it down makes it real, keeping it in front of you makes it harder to ‘accidentally’ ignore it.
3) Give and Take from Your Overall Trip Budget
Flying is part of the experience, just like buying souvenirs, snorkeling, or going out for that nice dinner. Maybe you’re willing to sacrifice a nice dinner for a more comfortable flight or shorter flight itinerary. Even if you aren’t a budget person, jot down how much you’re going to spend within different categories – accommodation, food, transportation, activities, shopping, insurance, whatever… If you reduce your activities budget from $400 to $250, then you have $150 more towards something else. Sometimes we get anchored to more expensive flights, but also get anchored to more expensive and exciting activities, and end up blowing the budget on both. This strategy will help you understand your priorities.
4) Use Your Imagination
Often when we are booking our flights, we underestimate the discomfort or the exhaustion from the plane. I know when I’m booking I think to myself, “oh whatever, I’ll just suck it up, it’s only a 3 hour flight”, only to be cursing the experience from start to finish and swearing I’ll never do it again because it was so awful. This is known as the Hot-Cold Empathy Gap – it basically means that it is hard for humans to predict how they will behave in the future, underestimating how our feelings (being angry, hungry, uncomfortable, etc.) impact behaviours, decisions, or preferences.
When we are booking our flights, we are in a cold state, normally in the comfort of our homes. We aren’t in that same hot state, all annoyed and uncomfortable and tired on the plane. If we were in the hot state while booking, we surely would opt for the more comfortable fare. Perhaps it’s worth using your imagination to see how you will feel on that 9 hour layover after boarding a 1am outbound flight? Maybe that’s the case to pay the extra money for a flight with a better experience.
And If You’re Going To Splurge…
Do it on the way home. How we remember is not equal to all the positive and negative moments in an experience, but is weighted more to the extreme moments and to the end. If you want to make sure you do what you can to create a positive memory from your trip, I encourage you to splurge on the trip home.
If all else fails, remember what the Buddha said:
“It is better to travel well than arrive”
Love,
