* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Download Hospitality and Tourism
Survey
Document related concepts
Planned obsolescence wikipedia , lookup
Marketing strategy wikipedia , lookup
Global marketing wikipedia , lookup
Market penetration wikipedia , lookup
Green marketing wikipedia , lookup
Gasoline and diesel usage and pricing wikipedia , lookup
Perfect competition wikipedia , lookup
Yield management wikipedia , lookup
Supermarket wikipedia , lookup
Dumping (pricing policy) wikipedia , lookup
Product planning wikipedia , lookup
Revenue management wikipedia , lookup
Congestion pricing wikipedia , lookup
Transfer pricing wikipedia , lookup
Marketing channel wikipedia , lookup
Price discrimination wikipedia , lookup
Service parts pricing wikipedia , lookup
Transcript
Pricing Products Back to Table of Contents Chapter 11 Pricing Products Pricing Products Pricing Strategies Factors Affecting Price 2 Pricing Products Chapter Objectives Explain the concept of price. Identify typical pricing strategies. Describe how hospitality and tourism businesses use discounting. Describe the concept of supply and demand. Explain elasticity of demand. Explain how the product life cycle affects price. 3 Pricing Products What Is Price? There are several terms for price in the hospitality and tourism industries. Airfare Cruise package Rack rate Toll Tariff Section 11.1 price the value placed on goods or services being exchanged Tuition Tip Commission Tax 4 Pricing Products What Is Price? Price is more than just the cost of an item. Price is also the value that the item holds for the consumer. Section 11.1 5 Pricing Products Pricing Hospitality & Tourism A number of techniques are used to assign prices to hospitality and tourism products. Section 11.1 6 Pricing Hospitality & Tourism Pricing Techniques Airlines Use a class system Cruise lines Based on cabin size and location Hotels Based on room categories Car rental companies Based on automobile type Restaurants Set à la carte or prix fix Section 11.1 7 Pricing Hospitality & Tourism Pricing Strategies Promotional pricing Psychological pricing Market-penetration pricing Breakeven pricing Cost-based pricing Discounting Section 11.1 8 Pricing Products Promotional Pricing Hospitality and tourism businesses use promotional pricing strategies to generate sales during traditionally slow periods. Losses incurred from lower-priced promotional items will be made up by purchases of other items. Section 11.1 9 Pricing Products Promotional Pricing Lodging properties also use promotional pricing. Packaging several products together for one price adds value for the customer and creates a positive image for the business. Section 11.1 10 Pricing Products Psychological Pricing The price of a product has a psychological impact on customers. prestige pricing pricing based on consumer perception Hotels and restaurants that focus on establishing a luxury image use prestige pricing. Section 11.1 11 Pricing Products Market-Penetration Pricing Market-penetration pricing happens when a company prices its products at or below cost just to enter the market and gain a market share quickly. Section 11.1 12 Pricing Products Breakeven Pricing For breakeven pricing, a business determines the price of a product or service at which it will break even. To break even, the price must generate enough revenue to cover the costs and expenses of the product. Section 11.1 13 Pricing Products Cost-Based Pricing One of the easiest methods used to set price is markup. markup the difference between the retail or wholesale price and the cost of an item When using cost-plus pricing, the goal is the same—to make a profit. cost-plus pricing pricing products by calculating all costs and expenses and adding desired profit Section 11.1 14 Pricing Products Discounting Discounting is a strategy used to reward consumer behavior, such as booking early, buying offseason, or buying in volume. Prices are adjusted by a certain percentage, or special rates are assigned to specific periods. Section 11.1 15 Pricing Products Special Pricing Strategies Price lining is selling all the products in a product line at specific price points. Bundle pricing is a strategy that involves selling several items as a package for a set price. Loss-leader pricing is pricing an item at cost or below cost to draw customers. Yield-management pricing is pricing items at different prices to maximize revenue when limited capacity is involved. Section 11.1 16 Pricing Products Value, Price, and Strategy It is important to know the value of a product or service before pricing it. Value differs from one consumer to another. Section 11.1 17 Pricing Products Name Your Price According to aan study 2003, 75 on percent of travelers who use the Operating e-tailinbusiness an electronic channel—the Web—can be costly, due to design, delivery, returns, and Internet visit three or more Web sites before purchasing their operating tickets. Their expenses. decisions depend on price, not brand loyalty. Online travel sites, such as Priceline and Hotwire, take advantage of the Though Many larger dot-com companies crashed in the price-minded travel consumer. 1990’s, small stores like Harris Cyclery of West Newton, These name-your-price travelincrease sites allow theusing user to request a Massachusetts, actually sales a basic Web certain foraathird ticket, details, rides and then site. price Today, of provide Harris’scredit-card bicycle business in on purchase thetoticket. Online travel services are reaching millions of the Web get hard-to-find parts and personal service. users. However, there are drawbacks for some consumers, such home page to your class after as Describe no refundsanfore-business’s tickets and inconvenient flight times. viewing one through marketingseries.glencoe.com. For more information, go to marketingseries.glencoe.com. Section 11.1 18 Pricing Products 11.1 1. What is cost-plus pricing? 2. How do hospitality and tourism businesses use discounting? 3. Describe the concept of yield management. Section 11.1 19 Pricing Products External and Internal Factors External and internal factors can affect product-pricing decisions. Section 11.2 External Internal • Market-demand issues • Competition • Economy • Environmental conditions • Company’s marketing objectives • Marketing mix 20 Pricing Products External and Internal Factors If the supply of an item is limited, the price is usually higher. supply the amount or quantity of goods and services that producers provide at various prices How much product a company will sell is directly related to demand. demand the amount or quantity of goods and services that consumers are willing to buy at various prices Section 11.2 21 Pricing Products External and Internal Factors Fluctuating demand can be caused by seasonal changes. elasticity of demand the variation of consumer demand due to a change in price When demand increases because the price decreases, or vice versa, there is elasticity of demand. Section 11.2 22 Pricing Products External and Internal Factors To be competitive, a business must price its products lower than its competitors’ products to draw customers. Section 11.2 23 Pricing Products External and Internal Factors A business must consider the economic environment. Factors that affect pricing conditions include periods of recession and state and local taxes. Section 11.2 24 Pricing Products External and Internal Factors Environmental conditions that affect pricing decisions and consumer demand include: War or threat of war Terrorist acts Bad weather Section 11.2 25 Pricing Products External and Internal Factors A business must first look at the cost of doing business to determine price. To make a profit, a business must cover expenses in developing and delivering a product. Section 11.2 26 Pricing Products Internal Factors Pricing decisions are made by senior management staff, the marketing or sales department, or by company policy. Factors such as the company’s marketing objectives and marketing mix must be considered for pricing to be effective. Section 11.2 27 Pricing Products The Product Life Cycle and Pricing The stages of a product’s life cycle are: Maturity Growth Decline Introduction Section 11.2 28 The Product Life Cycle and Pricing Prices remain the same or may be lowered to attract customers. Maturity Decline Growth Introduction Prices are high to cover the costs of production. Section 11.2 Prices may have to be lowered to keep customers. Promotional efforts may increase. A company that continues to market a declining product will lose money. Product must be kept or dropped. 29 Pricing Products Prices Subject to Change Customers want the best value for their money, and businesses want to sell as much product as possible. When a product’s price is set, it should be reviewed regularly to determine if adjustments are necessary. Section 11.2 30 Pricing Products 11.2 1. What is meant by elasticity of demand? 2. What are some of the internal and external factors affecting price? 3. What is the effect of the growth stage on price? Section 11.2 31 Pricing Products Checking Concepts 1. Define the term price. 2. Identify who decides if exchanging money for a product is worth the benefit. 3. List the typical pricing strategies. continued 1. The 2. 3. Pricing Price consumer is strategies the value placed on decides include promotional if goods or services being exchanging pricing, money exchanged. is psychological worth the benefit or valuemarketpricing, of a good or service. pricing, penetration breakeven pricing, cost-based pricing, discounting, and other special pricing strategies. 32 Pricing Products Checking Concepts 4. Give two examples of discounting in hospitality and tourism. 5. Explain consumer demand. 6. Describe how the economy may affect prices. continued 4. Economic 5. 6. Discountsconditions Demand isare the affect prices in many offered amount in orthe quantity ways: During periods of hospitality of goods and and recession, consumer tourism services that spending industries decreases for booking consumers are early, and businesses may have to lower prices buying willing to off-season, buy at to keep customers. and buying various prices. in Inflation, rising interest volume. Examples rates, and other will vary. conditions economic influence pricing. 33 Pricing Products Checking Concepts 7. Explain how prices are affected during a product’s decline. Critical Thinking 8. Discuss adjusting prices according to environmental conditions. weather and other 7. Bad 8. During the decline adverse stage ofenvironmental a product, conditions can prices may be negatively affect a lowered to keep travel/tourism customerspricing. buying company’s To provide incentives for the product. customers to travel, travel-related businesses may offer value-added packages or lower prices. 34 End of Pricing Products Back to Table of Contents Pricing Products 36