The challenge for businesses is how to maximise profits when making decisions that could potentially anger customers or create legal issues. With their venues’ capacity in mind, companies have to ask themselves: which customers should we target, without necessarily trying to cater to as many people as possible, and charge them based on how much they are willing to pay. They also need to establish whether:
- to offer an exclusive service to a specific customer segment or roll it out to many people who share the same venue
- customers who fall into different categories or segments are charged differently
- the venue is exclusive to certain customer segments (non-smoking restaurants in countries where people can still smoke in eateries), or always available to all.
Dr Kostami’s research suggests that businesses may be better off if they target just one customer segment rather than several – especially if price discrimination isn’t an option. This could be for legal reasons or because different types of customers aren’t happy about sharing the same venue.
Take Fitness USA’s decision to convert two venues to women-only gyms. Restricting access to females means that most women are willing to pay more for the overall service. Moreover, the company doesn’t have to worry about what to charge men, so there’s no danger of price discrimination. This problem could arise if, for example, women were charged less to share the gym with men.
Another option to restricting access is for service providers to introduce a ‘time allocation’ policy, where they offer exclusive use of their venue to different customers at varying times.