The New Spirit of Pricing?

Ben Baldanza, CEO of Spirit Airlines, was quoted in today's Wall Street Journal as saying his company was "traditionally an irrational low-price player" but now it's "trying to be smart about pricing."

Like so many other carriers, Spirit is being squeezed by skyrocketing fuel costs. When it raised prices a few months ago, passenger traffic dipped--but profitability apparently improved. Here's a recent article (from Boca Raton News) about Spirit's new spirit of profitability:

http://www.bocaratonnews.com/index.php?src=news&prid=15438&category=BUSINESS%20NEWS

Having been involved in pricing a variety of offerings, I think this is the trickiest of all marketing decisions. Among other things, you must consider your costs--which are often the floor for pricing--and your objectives, such as profitability or market share (short-term and long-term, product-by-product as well as for the overall product line or company). You also have to factor in competitive offerings and prices plus the environment in which the purchase will be made.

The bottom line for the bottom line, however, is to know who you're targeting and how those customers perceive value. Is Spirit targeting family vacationers or business travelers? How do these customers behave? Why do they fly and what benefits do they seek? How price-sensitive are they? What are their alternatives and priorities? What costs are associated with delivering the offering(s) customers are willing to buy?

As a customer, I don't just look for the lowest price. Any airline that thinks I'd be willing to save $200 by flying from Boston to Calgary by way of Atlanta and Dallas (with 2 layovers in 11 hours) is sadly mistaken. As a marketer, I need to approach pricing decisions by starting with my customers, not focusing only on my costs. What do you think?