THM 106 (Reviewers) PDF - Pricing Strategies

Coverage: Chapter 5 Price Mix and Chapter 6 Promotion Mix only Types of Test: Identification, Multiple Choice, True or False, Enumeration CHAPTER 5 PRICE MIX The price of a service is the value attached to it by the service provider and it must correspond with...

Coverage: Chapter 5 Price Mix and Chapter 6 Promotion Mix only Types of Test: Identification, Multiple Choice, True or False, Enumeration CHAPTER 5 PRICE MIX The price of a service is the value attached to it by the service provider and it must correspond with the customer's perception of value. Price is the exchange value of a product or service, always expressed in terms of money. In the service sector, the term "price" often passes under a number of names (interest fees, rent, salary, etc.); sometimes it also reflects the nature of the relationship between the customer and the provider. Price is equal to the product or service expectations, namely, physical product, service, and other attributes making it available such as delivery, installation, credit, return, privileges, and other after-sale services. PRICE This is one of the most important elements of the marketing mix, as it is the only mix which generates a turnover for the organization. The amount of money charged for a product or a service. MOST COMMON PRICING OBJECTIVES 1) Profit Oriented Objectives Target Return Objectives (Sets a specific level of profit as an objective.) Profit Maximization (Seeks to get as much as possible.) 2) Sales Oriented Objective Seek higher level of sales volume 3) Status Quo Objective copies the price levels of its competitors or maintains the current price levels of similar products or services in the market. Hospitality Pricing Objectives Taking into account the characteristic feature of hospitality services such as intangibility, perishability, and heterogeneity, etc. Following are some hospitality pricing objectives (Lazer and Layton):  1) Increase market share by a certain percent 2) Realize a specified profit level 3) Achieve a specified rate of return 4) Maintain an exclusive image 5) Appeal to new market segments Factors Influencing the Pricing Decisions of Service INTERNAL FACTORS a) Organizational Policies - As price the pricing takes at the top level and the lower level of an organization. a) Service Differentiation - the service provider has to price the services differently. b) Service Cost - price charged for a service, covers the fixed variable and semi variable cost incurred in providing that service. c) Marketing Mix - The price of a product depending upon whether the product or service idea is new or an established one EXTERNAL FACTORS a) Different Groups of Users -Depending on the user's demand for the product or service b) Different Points of Consumption -service organizations charge different prices at different service locations. c) Different Time of Production -depending upon the time at which are offered. d) Competition -plays a significant role in pricing e) Governmental Control -Government policy regulations affect the pricing decisions of various service METHODS AND STRATEGIES OF PRICING IN HOSPITALITY SERVICES Market Skimming Price -Initially the products will be introduced in a high price and subsequently settled down for a lower price. Market Penetration -Initially introduced at a lower price and increase its price as its demand in the market increases.(Opposite of skimming) Prestige -sets prices of luxury products to the expectations of a niche class of customers Price Lining -products or service within a specific group are set at different price points Odd Even Pricing -cost between products priced at a whole number value and products priced slightly below this whole number.(99, 149 and etc) Bundle Pricing -Combining of several products and offering the bundle at a reduced price. Bait Pricing -Advertising a low-priced product but then trying to persuade customers to buy a higher priced one. Price Leadership -establishing their price based on the price set by the price leader. Captive Product Pricing -Where products have complement Price Discrimination -Different prices to different buyers for the same products Competition Pricing -Setting a price in comparison with competitor’s. Optional Product Pricing -Companies will attempt to increase the amount customers spend (airlines) Premium Pricing -The price is high to reflect the exclusiveness of the product. Economy Pricing -This is no-frills low price. Geographical Pricing -evident where there are variations in price in different parts of the world. Value Pricing -force companies to provide “value” products and services to retain sales e.g., Value Meals at McDonalds. Stay – out Pricing -marketer sets low price that they discourage new competitors from entering the market. MARKET SKIMMING PRICE pricing strategy involves setting a high price initially to attract customers who associate high prices with superior quality, then gradually lowering the price over time? YIELD MANAGEMENT name of the pricing technique used to maximize revenue for perishable commodities like hotel rooms and airline seats? REVPAR the key metric used to measure a hotel's performance by calculating the average revenue generated per available room? The following are some factors which a customer looks at while willing to pay for a restaurant product/service: 1. The uniqueness of the menu 2. The quality of food and service 3. The reputation of the chef 4. The image, ambience, etc. The following are some popular tactics of pricing: 1. Ongoing discount programs (Senior citizens, club members, families) 2. Holiday Promotion 3. Special Event Pricing 4. Package Promotions (dinner/room packages, travel packages) 5. Meeting competitor's prices  CHAPTER 6: PROMOTION MIX Promotion It is the element of marketing mix that includes all forms of marketing communications. 1) ADVERTISING Any paid form of non-personal presentation and promotion ideas goods or services by an identified sponsor. DIFFERENT TYPES OF ADVERTISING Brand advertising (making the public aware of a particular brand) Promotional advertising (inform promotional activities like special sale) Advocacy advertising (aims to convince regarding a particular cause) Classified advertising (inform opportunity such as buy and sell) Comparative advertising (compares the brand into one or two other brands) Institutional advertising (aims to develop goodwill to a company) ADVERTISING OBJECTIVES: New product Product function QNew uses and correct usage New distribution Price adjustment 2) PERSONAL SELLING informing and persuading through person to person CLASSIFICATION OF PERSONAL SELLING JOB Across the counter selling House to house selling Dealer. Manufacturer 3) SALES PROMOTION -activities which supplement both personal selling and advertising coordinate them and help make them more effective. PROMOTIONAL TOOLS Prizes, contests, sweepstakes and game's (offers the Chance to win) Cross promotion (using one brand to advertise non- competing brand) Patronage awards (values in cash)  Free trials (inviting to try the product) Product warranties (explicit or implicit promises) Tie in promotion (two or more brands or company team up) Point of purchase (display and demonstration takes place) 4) PUBLIC RELATION Activities involved in actively seeking to manage the nature of the publicity. PUBLIC RELATION TOOLS Press conference (officially distributing information and answer questions) Community involvement (engaging in dialogue and collaboration with community members) exclusive interview 5) DIRECT MARKETING selling of products directly to the public DIRECT MARKETING TOOLS Online marketing or Internet advertising ( form of marketing used internet) E-mail Marketing (act of sending a commercial message) Text-brigade-text blast marketing( most effective way for business)