Unlocking revenue : psychological pricing effect for airlines’ upselling strategies

Abstract

Airlines emphasize the importance of upselling strategies to ensure successful revenue management. This study provides empirical evidence for psychological pricing strategies, focusing on psychological thresholds and price colors in the context of upgrade decisions. Specifically, the research indicates that a lower psychological threshold between the base price and the upgrade price can increase the willingness to accept the upgrade (Study 1). It confirms the mechanism behind the psychological threshold effect, which is attributed to the perception of price (i.e., perceived expensiveness) (Study 2). Furthermore, when only the upgrade price is presented in red, consumers perceive it as a reasonable price and exhibit an increased intention to purchase an upgraded seat (Study 3). This research offers valuable insights for airline marketing managers regarding psychological pricing strategies aimed at encouraging seat sales.