Prospect Theory

I am in search of a way to fight with a discount tactic. As I work in the hospitality industry, it’s a mammoth task to fight against the influence of Online Travel Agents (OTAs). Customers always look for good deals, deep discounts. It’s really difficult.

However, it doesn’t mean there is no hope. I just need to think harder and do more research. I came across the theory called “Prospect Theory”. The main idea of this theory is people don’t evaluate things in absolute terms. They evaluate them relative to a comparison standard, or “reference point”. Basically, if I tell you a cup of cappuccino in Australia costs $4.00. It’s just a single number that doesn’t mean much. But, if I also tell you that a similar cup of cappuccino in Thailand cost about $3.00. Then, the first idea that comes to mind is that coffee in Thailand is cheaper than in Australia.

This theory makes me think that we don’t always have to give a massive percentage discount e.g. 50% OFF. What we could do is to do the same tactic as many retailers i.e. have a reference point. For example, instead of saying getting 10% off for your next booking, we could say book now and pay only $99/night (normal price is $109/night).

That is just one way to do it. I am sure there are other ways. I will share with you if I find more ways in the future.


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