Clear, Smart Pricing

As a frequent flyer, nothing is more annoying than having to stand in long security lines, watching the TSA [Thousands Standing Around] pat down little old ladies in wheelchairs.

Fortunately, Dan Morris turned me on to Clear, a Silicon Valley company that enables you to move to the front of the security line in airports where they are present. San Jose airport got Clear long before San Francisco, but once it came to SFO, I signed up.

The customer service from Clear is exceptional. The people are always polite, helpful, and escort you to the front of the line. All for $99 per year.

Dan and I joked that we thought the price was too low, trying to figure out how they could be making money since they have enormous investments in equipment (retina and fingerprint scanning machines), as well as paying rent in high price airports.

Well, indeed, they are now raising their price to $199 per year. But notice how they did it.

We often hear that loyalty is dead in the business world, especially among customers. But I never believed this. I think humans find it easier to be loyal, it reduces many costs and risks in our lives.

What’s dead is a reason to be loyal. This is exacerbated when we receive notices in the mail offering low prices to new customers from our cable, cellular, and credit card companies.

In other words, let’s charge lower prices to low-value customers, and higher prices to loyal customers. It never made any sense to me, since it doesn’t reward loyalty.

This is how Clear notified its members of its price increase, in an email from CEO Steve Brill:

As of October 15, new annual memberships in Clear will cost $199. It’s a price that reflects the rapidly expanding value (and cost to us) of the Clear network.

Our market tests indicate that because of this expanding network and the reputation we have won for delivering on our promises, our new price—which is necessary to solidify our business as we move beyond the start-up phase—will be well received. However, we do not want the customers who supported us from the beginning in building that network and reputation to have to bear the brunt of these costs.

Therefore, I am writing to you with the following special offer: Because you are a current Clear member, if you renew now, you can save $40 and renew for $159. Plus, you have the option now to renew for up to ten years at annual prices that are even less than $159 a year, while protecting you from future price increases. And, of course, you can always get a pro-rated refund on any unused portion of your membership, should you no longer need Clear.

I don’t particularly care about Clear’s rising costs, but his statement about the value is emphatically true. And this statement is even better, especially for us loyal customers:

Most subscription businesses offer deep discounts to lure new customers, while charging old customers a higher price. I’ve always thought that “penalizing” your best customers that way didn’t make sense. Instead, this continuing discount for renewing members seems a smart, fair way to recognize our earliest supporters, while helping us to finance the future expansion of Clear, both in terms of airports covered and the services and equipment we invest in.

Then, as a value-added inducement to renew early, he offers a special Clear ID card that can replace your driver’s license for airport security purposes.

This is strategic pricing. Knowing your value, communicating it clearly, all the while rewarding loyalty.

Are you doing the same thing in your firm?

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