Innovation Sighting – The Attribute Dependency Technique in Pricing

by Drew Boyd

Innovation Sighting - The Attribute Dependency Technique in PricingThe airline, Samoa Air, sparked outrage with a new pricing policy of charging passengers based on how much they weigh.

Chris Langton, the airline’s CEO explained its controversial decision: “People have always traveled on the basis of their seat but as many airline operators, know airlines don’t run on seats – they run on weight,” he said.

“We have worked out a figure per kilo. This is the fairest way of you travelling with your family or yourself. You can put your baggage on, there are no separate fees because of excess baggage – a kilo is a kilo is a kilo.” Rates start at $1 per kilo (about 2.2 pounds), which includes the weight of both the passenger and his or her baggage. For longer routes, rates run as high as $4.16 per kilo.

While not popular, it is a classic example of the Attribute Dependency technique. Attribute Dependency is one of five techniques of the innovation method called SIT (Systematic Inventive Thinking). It differs from the other techniques in that it uses attributes (variables) of the situation rather than components. Start with an attribute list, then construct a matrix of these, pairing each against the others. Each cell represents a potential dependency (or potential break in an existing dependency) that forms a Virtual Product. Using Function Follows Form, we work backwards and envision a potential benefit or problem that this hypothetical solution solves.

The essence of Attribute Dependency is “as one thing changes, another thing changes.” Setting prices for products and services is largely an exercise of using Attribute Dependency. The price of a product changes as its value changes. But value is not the only variable that you can link to changes in price. Consider these examples:

  • Price changes as age of the customer changes: senior citizen discounts
  • Price changes as quantity changes: quantity purchase discounts
  • Price changes as risk changes: this is how insurance and warranty policies are priced
  • Price changes as time changes: charging lower prices for drinks at a bar is typically called Happy Hour
  • Price changes as gender changes: while it may seem discriminatory, men don’t complain when bars let women in for free
  • Price changes as need changes: this one usually gets people mad because it takes unfair advantage of a situation. Charging more for bottled water on hot days is an example.

The beauty of Attribute Dependency is you can define the way two variables are correlated, either positively or negatively. Air Somoa, for example, might want to consider flipping the dependency to make it more acceptable. Everybody pays the same amount, but if you are under a certain weight, you accumlate “weight credits” that you can apply to later flights.

You can also break a dependency that already exists. Restaurants do this when they offer a buffet at one price. You can eat all you want for the same price. The typical link between price and quantity of food has been broken. Of course, if you eat too much, you’ll pay for it later if other airlines adopt the Samao Air approach.

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Drew BoydDrew Boyd is Assistant Professor of Marketing and Innovation at the University of Cincinnati and Executive Director of the MS-Marketing program. Follow him at www.innovationinpractice.com and at http://twitter.com/drewboyd

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