Brands in the News

Communicating a Price Change

18 Apr 2016  

Two weeks ago I wrote on this blog about a new fee from Homeaway, a vacation home rental giant. I noted that the pricing move made good sense for a number of reasons.

The post generated quite a response. I’ve received a series of comments, many of them thoughtful, from Homeaway and VRBO customers. The consistent theme is that people think the new fee is unreasonable and damaging. Property owners are now looking for alternative sites.

Many of the posts reflect deep anger. One person wrote, “Execs at VRBO/HOMEAWAY/EXPEDIA are under-handed, double-talking, contract-breaking, money-grabbing crooks.”

Clearly, Homeaway’s new fee isn’t going over well. So what happened?

While I continue to think that the new fee makes sense from a business perspective, Homeaway failed on implementation. There were three issues:

Limited Communication

Homeaway did a poor job informing people about the change. One day Homeaway just started imposing the significant new fee. It showed up unannounced, and this confused both property owners and renters. The surprise turned to anger.

Weak Justification

Homeaway justified the new fees by explaining that the company was investing more in advertising. This rationale didn’t resonate with most property owners. Many simply didn’t believe it.

I suspect everyone knew the real motivation: Homeaway wanted to increase profits. Providing a justification that lacked credibility did more harm than good; it made the company look disingenuous. It was an almost insulting move. Did Homeaway executives really think some pleasant statements about marketing would make all of their customers happy with a massive price increase?

A One-Sided Proposition

Homeaway’s new fee helps Homeaway and Expedia, its new owner. It provides no benefit at all for customers. For them, it is just a considerable incremental cost. It isn’t surprising that customers are not happy with the change.

An Alternate Plan

Homeaway should have had a much more developed communication program. The company could have given property managers a significant advanced notice, with a series of emails and articles. Homeaway also should have been honest about the rationale.

Most importantly, a more balanced proposition would have eased the impact of the news. Homeaway, for example, could have reduced existing listing fees as it introduced the new structure. The company could have cut credit card charges, or added an insurance program.

Starbucks recently changed its awards program, restructuring how people earned points. The move was fairly significant but seems to have generated little negative reaction. The reason? Starbucks communicated the changes at length and well in advance. The company also noted that the new program was an improvement for many customers.

The lesson is that you have to be careful when making a major change to an existing business. Communication is key. As a speaker in my class at Kellogg noted last week, “Take a deep breath and don’t do anything until you think through the communication plan.”

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