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From Free to Fee: The Marketing Genius Behind Charging for Hotel Breakfasts

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A while back, Four Points, now part of Marriott but formerly known as Four Points by Sheraton, launched a campaign promoting their “Breakfast for a Buck” offer.

Essentially, customers in the American market could book a stay and, by paying just one dollar more, enjoy breakfast.

This campaign proved highly successful and remains active today under Marriott, further confirming the appeal of the offer.

Interestingly, this campaign may seem counterintuitive to the classic concept of an included breakfast or breakfast as part of a room package.

However, there are several psychological principles and marketing tactics that can explain this choice.

Let’s examine a few.

 

#1 Perception of Value

The concept of free is a double-edged sword.

On one hand, everyone loves a freebie. It attracts attention and can be a powerful incentive.

However, there’s a hidden side to this. When something is offered without any cost, its perceived value can often diminish in the eyes of the consumer.

Now, let’s consider the opposite scenario. Imagine you’re being charged, even if it’s just a symbolic amount like a dollar. This small transaction changes the dynamics. Suddenly, what you’re receiving isn’t just another complimentary item; it’s something you’ve invested in, albeit minimally.

By introducing a nominal fee, you send a message that the product or service has inherent value. It’s not just another throwaway freebie; it’s worth something. And when consumers pay, even if it’s just a fraction of the actual cost, they often attribute more value to it.

After all, if you’ve parted with your hard-earned money, even just a bit, wouldn’t you naturally feel that what you’re getting in return holds some significance?

#2 Contrast Effect

In the vast realm of behavioral economics, the contrast effect plays a pivotal role in shaping consumer decisions.

The principle is simple yet profound: our perception of something is often influenced by its contrast with another item. For instance, if you were to see a moderately priced item immediately after seeing a very expensive one, you’d likely perceive the former as more affordable, even if it’s not necessarily cheap.

Now, let’s apply this to the hotel industry. Hotels offer a myriad of services, from luxurious spa treatments to gourmet dining experiences.

These services, often perceived as high-end, set a certain expectation of cost in the minds of guests. When juxtaposed with an offer like breakfast for just a dollar, the contrast is stark.

Suddenly, this breakfast feels like an incredible deal, even if other services come at a premium.

The brilliance of this strategy lies in its ability to make guests feel they’re getting exceptional value, all thanks to the power of contrast.

3# Psychological Barrier

In the intricate dance of consumer behavior, psychological barriers often dictate the steps.

A price, even a symbolic one, can serve as a gatekeeper.

It’s not about excluding, but rather about filtering.

By charging a nominal fee, hotels subtly set a threshold.

This threshold differentiates between those who are merely browsing and those who are genuinely interested.

In the context of hotels, this small fee ensures that those who opt for the breakfast are those who truly value it.

It’s a delicate way of enhancing the overall guest experience, ensuring that services meet the expectations of a more discerning clientele.

#4 Minimization of Losses

Efficient resource management is a cornerstone of successful businesses, especially in industries like hospitality where margins can be tight.

Imagine running a hotel hosting 100 guests per night.

If all of them have booked a rate inclusive of breakfast, the hotel faces a challenge: how to determine the actual number of guests genuinely interested in the morning meal.

Preparing a buffet or continental breakfast to cater to everyone can lead to significant wastage and increased costs.

Enter the strategy of charging a symbolic fee, like $1, for breakfast. While this fee might seem negligible to those truly desiring a morning meal, it can act as a subtle deterrent for guests who might usually skip it.

This small barrier allows the hotel to better gauge the actual demand for breakfast, leading to more accurate preparations and reduced wastage.

The result? Decreased costs and improved expense management, all while ensuring guests who truly value the breakfast experience are catered to.

#5 Differentiation

Differentiation should be the norm. Unfortunately it’s more often the exception.

With countless businesses offering similar services, standing out becomes paramount.

Consider the hotel industry. With so many establishments providing complimentary breakfasts, how does one hotel make its mark?

By introducing a unique pricing strategy, such as charging a nominal fee for breakfast, a hotel can set itself apart.

This not only sparks curiosity among potential guests but also positions the hotel as an innovator, a brand willing to challenge the status quo.

It’s not merely about the price of breakfast; it’s about creating a distinct brand identity in a sea of sameness.

Such strategies can lead to increased brand recall, loyalty, and ultimately, a stronger market presence.

#6 Revenue and Profit Opportunity

Consider the traditional approach: a hotel room priced at $100 with an additional charge of $20 for breakfast.
This brings the total cost to $120.

Now, juxtapose this with a strategy where the room is priced at $120, but with a promotional offer of breakfast for just $1.
At face value, the difference between the two strategies is a mere dollar.

However, the dynamics change completely, because the room price itself heavily impacts the perceived value of your hotel, in the eyes and in the mind of your prospective customers.

The OTAs are masters at leveling the playing field in terms of perceived value. Whether it’s a budget-friendly 2-star hotel or a luxurious 5-star property, on these platforms, they’re presented with minimal differentiation.

The unique branding and communication that a hotel might pride itself on are often diluted.

In such a scenario, potential customers, devoid of tangible differentiators, lean heavily on price as an indicator of value.

A higher price can often translate to a higher perceived value. Conversely, a price perceived as too low might inadvertently diminish the hotel’s value in the eyes of potential guests.

Given this, bundling becomes a strategic move. Instead of a separate charge for the room and breakfast, combining them into a single package of $120, while still leveraging the allure of a $1 breakfast promotion, can significantly elevate the perceived value.

It’s not just about the actual cost; it’s about crafting a pricing narrative that resonates with potential guests, making them feel they’re getting unparalleled value.

#7 Anchoring Effect

The human mind is a fascinating entity, often influenced by subtle cues and initial impressions. One such psychological phenomenon is the ‘anchoring effect’.

At its core, the anchoring effect refers to our tendency to rely heavily on the first piece of information we encounter when making decisions. This initial information, or ‘anchor’, can significantly influence subsequent judgments and perceptions.

In the context of the hotel industry, this can be strategically leveraged. Imagine a guest first seeing a room’s price, setting their expectation. When they later encounter the nominal fee for breakfast, this cost seems trivial in comparison, enhancing its perceived value.

The brilliance lies in the sequence. By presenting the room rate first, the hotel sets a higher anchor, making everything that follows seem more affordable and valuable.

It’s a masterful play on perception, guiding guests to view offers in a light most favorable to the hotel, all while ensuring they feel they’re receiving excellent value.

#8 Sense of Control and Reduced Perception of a “Trap”

Trust and transparency are cornerstones in the relationship between businesses and their customers.

In many industries, especially hospitality, there’s a delicate balance to strike between offering deals and ensuring customers don’t feel there’s a catch or a “trap”.

By charging a symbolic fee for a service, businesses can alleviate any underlying suspicions. It’s a clear, straightforward transaction, devoid of any hidden implications.

This approach gives customers a feeling of control over their choices. They’re not being lured into a free offer only to discover caveats later. Instead, they’re making an informed decision, fully aware of the costs involved.

In essence, it’s about fostering a sense of empowerment among guests. By being transparent and giving them the reins, businesses can build trust, ensuring a positive and lasting relationship.

Concluding Thoughts

The “Breakfast for a Buck” campaign, though seemingly simple, is a testament to the power of strategic thinking, leveraging deep-rooted psychological principles to craft a compelling narrative.

It’s not just about the tangible offerings, but the stories we tell and the perceptions we shape. By delving into the intricacies of value perception, contrast effects, psychological barriers, and more, hotel marketers can create experiences that resonate deeply with their audience.

As we’ve explored, it’s often the counterintuitive strategies that stand out the most, challenging the status quo and redefining norms.

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Digital Strategy & E-commerce Expert for Independent Hotels.

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