1. For each of the following pricing policies, state whether or not you think it

Question

1. For each of the following pricing policies, state whether or not you think it is a profit-enhancing or profit-destroying, or neutral policy and explain your rationale. a. Giving double or triple frequent flyer miles to induce customers to try the airline on new routes where competitor’s already exist. b. Giving airline passengers who has a bad experience (e.g., seriously delayed flight due to equipment problem) bonus frequent flyer miles as compensation, even though not required legally to do so.

Explanation / Answer

a.In the first scenario we can see this is a situation of profit enhancing.As increasing flyer miles helps to attract customers to use that particular airline repeatedly to reach to destination faster than other airlines.So it helps to increase profit of that airline.In the second scenario,we get that when airline decides to provide bonus to which customers who had bad experience due to airline's fault then the airline is giving bonus from his earned profit to those customers.So they will loss certain amount of their profit as bonus is not legally required .So this situation is profit destroying.

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