Download Chapter 10 - Life cycle, Distribution & Pricing

Reaching New Heights . . .
Offerings, Distribution, and Pricing
Chapter X
Integrating Marketing in the Leisure Industry
Agency Offerings
Products - Physical goods that are presented to the
consumer.
Services - Amenities that support the primary product
offering.
Facilities - Physical structures available to consumers.
Programs/ Events - Activities that complement products
offered to consumers.
Delivery - Impacts the experience received by consumers.
Policy/ Procedures - Establishing boundaries for
participation.
Physical Environment - Physical attributes of the agency
itself.
Categories of Offerings
Intangible
Programs
Services
Delivery
Policies/procedures
Tangible
Product
Facility
Physical environment
Product Life Cycle
Product Development
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Modification
New Market
TIME/STAGES
Product Introduction
• Product unknown.
• Sales/participation is low/non existent and over time
begins to emerge and grow.
• Pricing may be high to capture top of market or
recover costs or low to penetrate the market and spur
consumption.
• Promotional statements are geared toward the needs
of the targeted markets.
• Agencies utilize heavy advertising, promotion, and
public relations tools during this phase to introduce
the offerings and induce trial and use.
Product Growth Stage
• Sales/participation is growing, as competitors are as
well.
• The product is becoming well known and brand
recognition is emerging.
• Pricing tends to be higher as demand increases as well.
• Distribution systems are expanded.
• Quality issues are emerging.
• Agencies place continued emphasis on advertising,
promotion and public relations, but also begin to utilize
other tools more moderately such as sponsorship,
personal selling, stewardship and internal marketing to
build brand loyalty.
Product Maturity
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Sales/participation has flattened or is slightly falling.
Large number of competitors exist on the market.
Agencies focus their efforts in building brand loyalty.
Promotional statements tend to be reminder oriented,
positioning against competitor while expanding on
competitive advantages.
• Less emphasis is placed on advertising and public
relations while increased focus on personal selling,
sponsorship, stewardship, community relations and
internal marketing to build and maintain loyalty exists.
Product Decline
• Revenues are extremely low and competitors have
reduced to only the strongest and most successful.
• Loyalty practices are the most successful tools to use
as agencies prepare for reemergence into the
introduction stage.
• Three main strategies exist for reemergence:
Product modification
Expanding to new market segments
Development of new offerings
Distribution
• Distribution is the way in which a leisure service
agency connects to consumers to ultimately provide
a leisure service experience.
Physical source
Physical location
Physical delivery
Physical Source
Links product to user and user to product.
Hotel - consumer
Hotel - travel agent - consumer
Hotel - tour operator - travel agent – consumer
WHY?
Reach more consumers.
Provide alternative ways to reach.
Maximize agency resources.
Better meet consumer needs.
Physical Location
• Provide golf clinics at a
local agency during
lunch hours.
• Provide aerobic classes
at an off site location.
• Oakland County Mobile
Recreation.
Physical Delivery
• Train staff to work with seniors.
• CPR and First Aid Certified.
• Develop a service recovery system to gain feedback.
Pricing
Steps taken in any pricing decision:
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Identifying the pricing objective
Assessing the pricing variables
Determining the price
Evaluating the pricing decision
Identifying the Pricing Objective
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We want to make money.
We want to break even.
We want to have as much participation as possible.
We want to turn off certain market segments or
demarket.
Assessing the Pricing
Variables
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History
Demand
Competition
Willingness to pay
Cost
Margin Issues
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Consumer tastes
Consumer income
Mob effect
Price range
Cost of info search
Perception of value
Availability of substitute products
Determining the Price
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Variable/Differential
Market Skimming/ Exclusivity
Market Penetration/ Discount
Breakdown
Pay One Price/Pay As You Go
Bundling/Unbundling
Captive
Psychological
Hidden Costs
Fixed to Variable/ Creative Variable
Price Performance
Differing Segments
Product Line
Pricing Strategies
1. Differential Pricing
– Selling the same
product/service to
different buyers at
different prices
– Can be illegal…
– Legal if…
– Second Market
Discounting
• Different prices
charged to different
segments of
consumers
Pricing Strategies
2. New product pricing strategy (org sets price
levels for products being introduced)
• Examples
– Penetration Pricing-product introduced at a low
initial price relative to the competition
– Price Skimming-org sets high prices and charges
more than the competition
Pricing Strategies
3. Psychological Pricing -consumer’s
emotion and image rather than
economics
• Examples
– Prestige Pricing
– Reference Pricing
– Odd-even pricing
Pricing Strategies
4. Product-Mix Pricing -profitability of entire
product line rather than setting prices for
individual products independently.
Examples-sporting events, baseball cards,
cruises
– Examples
• Bundle pricing
• Captive product pricing
Pricing Strategies
5. Cost-Based Pricing-the org examines all of
the costs associated with producing the
service before pricing.
• Cost Plus-price =computing the total cost (fixed +
variable costs) of producing the product and then
adding an additional cost to achieve the desired
profits.
• Target Profit-approx. prices are set based on the
target profit marketers have determined when setting
price objectives
• Break-even-determine the number of units it will have
to sell at a given price to break even
Break Even Formula
• Break Even Point =
Fixed cost
Price – approx. costs per person
Example:
$3,000
$15-$7
Break even Point=375 (race entries)
Pricing Strategies
6. Price Adjustments-caused by
competition, adjustments
made to create demand
• Examples
– Price reductions-enhance
sales
– Price increases-keep up
with cost inflation or there is
an excess demand
– Price Discounts
• Quantity
• Seasonal
Evaluating the Pricing Decision
• Monitoring participation and/or revenue or profit data.
• Analyze cause/effect relationships to prices.
• Understand the price sensitivity.
Yield Management
• A term concerned with understanding the balance
between the amount an agency sells of its offering at
the best price possible.
• An agency determines its yield by comparing
potential inventory to actual inventory.
• Yield management allows an agency to strategically
organize the agency’s inventory of offerings in a way
to be sold as effectively as possible to achieve
agency objectives.
• Yield management attempts to maximize the
opportunities for agencies, it combines the elements
of pricing and distribution to maximize opportunities
for agencies.